Marriage with WMG seems more likely due to Sony-BMG

BRUSSELS — Shares in British entertainment company EMI continued to rise Monday, amid speculation that a merger with Warner Music Group could be back in the cards.

The duo’s original proposal four years ago fell afoul of EU regulators, but smoke signals from the European Commission over Sony-BMG indicate that it may now get a more favorable hearing.

Officially, neither EMI nor WMG would comment on the speculation, but U.K. newspaper the Times quoted a source close to both companies saying that EMI and WMG were due to restart merger talks, convinced that the climate in the music market had changed. “If the commission is willing to go from five majors to four, it seems likely that it would accept moving from four to three,” the source added.

EMI last year explored mergers with both BMG and Warner but failed to proceed with either.

BMG and Sony then announced their merger, while Time Warners music division was sold in November to a consortium headed by Canadian media magnate Edgar Bronfman for $2.6 billion.

Executives at EMI have repeatedly stated that its long-term plan is to go it alone, and chief financial officer Roger Faxon has apprised analysts of the company’s strategy, claiming EMI has the greatest profit margin of all the major companies.

Nevertheless, a merger would offer EMI and WMG massive savings, and a change in attitude at the EU could prompt a third attempt to marry the two businesses, allowing WMG’s venture capitalist owners a quick return on their investment.

Its widely believed that EU competition commissioner Mario Monti will approve the Sony-BMG merger, despite earlier objections about its effects on competition, particularly in the emerging market for online music downloading.

The Sony-BMG tie-up, likely to be given the official greenlight on July 14 or 20, would leave around 80% of the European music biz in the hands of four main players: Vivendi Universal, Sony-BMG, EMI and Warner Music.

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