Bertelsmann and Sony finalize agreement

/ Source: The Associated Press

Bertelsmann AG and Sony Corp. have finalized a merger agreement that will bring some of the world’s top pop artists under one roof as music companies shore up their strength in the face of rampant file-swapping on the Internet.

The newly created Sony BMG will be equally owned by Sony and Bertelsmann, the two companies said in a statement Friday. It will be the world’s second-largest music company behind Universal Music Group, a part of Vivendi Universal SA.

Intially announced a nearly month ago, the deal is aimed at remaining competitive as the music industry struggles with losses blamed on the ease of exchanging music files on the Internet.

“Sony and Bertelsmann share the vision that this merger is the basis for a company that will concentrate on the creative key business,” Bertelsmann chairman Gunter Thielen said in a statement. “Our music business plays a key role for Bertelsmann and we believe in its future.”

No other financial terms were released for the deal. The companies said the merger would not affect either company’s music publishing businesses, CD and DVD productions, deliveries or Sony’s Japanese music business.

The deal is subject to approval from regulators in the United States and the European Union.
“I am convinced that this merger will give us the possibility to create better products for consumers around the globe and to react more effectively to the needs of artists,” said Andrew Lack, chief executive of Sony Music Entertainment.

Lack will lead the new company and Rolf Schmidt-Holtz, the chairman and chief executive of BMG, will serve as chairman of the board.

The merger will 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 Dido, the Dave Matthews Band, Christina Aguilera, Alicia Keys, Avril Lavigne and Elvis Presley.

The deal could still could run into trouble from EU regulators, who blocked a deal between Warner Music and EMI three years ago, saying it could lead to an oligopoly of four firms controlling 80 percent of the European market.

But changes in the market may work in Sony and Bertelsmann’s favor, antitrust lawyers have said, noting that with advances in the ability to download music over the Internet, the two could argue they need to be bigger to survive.

Last month, a consortium of investors led by former Universal Music chief Edgar Bronfman Jr. struck a $2.6 billion deal to buy Warner Music Group from Time Warner Inc., edging out Britain’s EMI Group PLC.

The deal, which also includes Time Warner’s Warner/Chappell Music publishing business, would create one of the world’s largest independent music companies and include some of the industry’s biggest artists, such as Madonna, R.E.M. and the Red Hot Chili Peppers.