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Sony, BMG to merge music interests

Bertelsmann AG and Sony Corp. plan to merge their music businesses, Bertelsmann announced Thursday.

Bertelsmann AG and Sony Corp. announced a preliminary plan to merge their music businesses Thursday, creating a company that would vie with Universal Music Group as the largest in the world.

A MERGER OF Sony Music Entertainment and Bertelsmann’s BMG would bring together the world’s No. 2 and No. 5 music companies as the industry struggles with losses blamed on music piracy.

The new company, to be called Sony BMG, would be equally owned by Sony and Bertelsmann and run by Andrew Lack, chairman and chief executive of Sony Music Entertainment. Rolf Schmidt-Holtz, the chairman and chief executive of BMG, would serve as chairman of the board.

Bertelsmann didn’t say whether the two companies had agreed on financial terms in their letter of intent or what issues remained to be worked out before a final agreement could be struck. Bertelsmann spokesman Patrick Reilly said the two companies had agreed to hold exclusive talks, but he did not say for how long.

Other major record companies also are seeking to merge as a way to shore up their strength in the face of declining album sales and rampant file-swapping on the Internet.

EMI Group PLC of Britain is in talks about the possibility of buying Warner Music Group from Time Warner Inc., three years after European regulatory opposition ended their discussions about a possible joint venture.

Sony BMG would have a combined global market share of 25.2 percent, according to the market measurement firm IFPI, just behind the 25.9 percent share held by industry leader Universal Music Group, which is part of the French conglomerate Vivendi Universal.

The deal, if it goes through, would combine Sony and BMG’s recorded music business but would exclude music publishing, physical distribution and manufacturing.

The board of the new company would be split, with an equal number of directors from each partner, and senior executives from both groups would join the venture.

An agreement would be subject to approval by regulatory authorities in the United States and Europe.

The deal would put some of music’s biggest stars under a common corporate roof. Sony Music Entertainment’s labels include Columbia, Epic, and Sony Classical, and it is home to pop artists including Bruce Springsteen, Beyonce Knowles and Celine Dion.

Among the stars on BMG’s various labels are the Dave Matthews Band, Christina Aguilera, Alicia Keys, Avril Lavigne and the late Elvis Presley

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