Time Warner, EMI to merge music units

Continuing its megamerger mania, Time Warner Inc. and EMI Group PLC today announced an agreement to combine their music businesses into a joint venture called Warner EMI Music. The planned merger, which would create the industry's largest music company, comes two weeks after Time Warner agreed to merge with Internet service provider America Online Inc.

The new company will be equally owned by Time Warner and London-based EMI Group and will marry the recorded music and music publishing businesses of the two companies, Time Warner and EMI said in a joint statement.

Analysts predicted the merger will fuel a new focus on selling music online using MP3 and other technology to let customers download music and pay for it electronically.

Under the terms of the agreement, EMI at completion of the deal will transfer to Warner EMI Music its net debt, valued at $1.5 billion as of Sept. 30, while Time Warner will transfer a comparable level of debt adjusted for interim activity. Time Warner will also finance a cash payment of 1 pound for each EMI share, in a cash transaction valued at some $1.3 billion, Time Warner and EMI said.

The companies intend to use their combined content, plus the Internet audience and expertise of AOL, to exploit the potential of digital media and realize the opportunities presented by the Internet and other new media, according to their published statement.

Concerned about loss of revenue over copyright issues, large recording companies have been reticent about moving online to offer music for download, either for free or for a fee. Only recently have the five (now four with the Warner-EMI deal) major music companies begun to move aggressively to increase their online presence. Warner Music Group currently runs the music news and sales site CDNow.

Roger Ames, chairman and CEO of Warner Music Group, a division of Time Warner that will be part of the new company, will be the CEO of Warner EMI Music. Ken Berry, CEO of EMI Recorded Music, will be chief operating officer of the new company, the companies said.

Time Warner President Richard Parsons and Eric Nicoli, chairman of the EMI Group, will serve as co-chairmen of the Warner EMI Music board of 11 directors, which will be controlled by Time Warner with six seats.

Warner EMI Music will be headquartered in New York. Its international operations will be based in London, the companies said.

Copyright © 2000 IDG Communications, Inc.

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