The Chemical Brothers

The Chemical Brothers at the Hollywood Bowl. (Gary Friedman / August 29, 2010)

Universal Music Group has submitted a proposal to the European Commission to sell off major assets in exchange for regulatory approval for its proposed $1.9 billion acquisition of EMI Recorded Music, the company said.

Because the deal would reduce the number of major record labels to three from four, regulators around the globe have launched antitrust reviews to determine whether the combined company would wield too much market power.

To appease European Union officials, who have insisted that Universal's market share not exceed 40% in any EU country, the Los Angeles music giant has devised a plan to sell off key properties. 

Roger Faxon, EMI's chief executive, on Friday gave a detailed list of the assets to be sold in a memo to employees that was obtained by The Times.

In the U.K., Universal agreed to sell Parlophone Records, a label that represents Coldplay, the Chemical Brothers, Sigur Ros and the Pet Shop Boys, among others, Faxon wrote. In addition, Universal said it would sell Mute Records, whose artists include Goldfrapp, Depeche Mode and A Place to Bury Strangers. Also on the auction block are the Pink Floyd catalog and EMI's recently signed deal with David Guetta.

Universal, however, intends to keep the rights to the Beatles, currently in the Parlophone catalog, as well as the Robbie Williams catalog, Faxon said.

Also on the auction block are two classical music labels, EMI Classics and Virgin Classics, as well as EMI's operations in France, Belgium, the Czech Republic, Poland, Portugal, Sweden and Norway. 

"We believe the package fully addresses the Commission's concerns and follows our constructive discussions with regulators, independent labels and competitors," Universal said in a statement.

The European Commission is expected to take several weeks to weigh Universal's proposal, Faxon said. Once regulators in Europe give the green light, Universal would be able to begin divesting assets. More than 20 potential bidders have stepped up, including BMG Rights Management, Sony Corp. and billionaire Richard Branson.

"With the wind behind our backs, we could close the sale and EMI could pass to UMG as early as the end of September," he wrote. "However, I think it is more realistic to plan for a close at the end of October."

EMI's owner, Citigroup, agreed in November to sell the company in two separate parts. EMI's music publishing business was sold to a consortium of investors led by Sony Corp. for $2.1 billion. That deal closed in June.

Current negotiations revolve around the second deal to sell EMI's recorded music business in Europe. Universal, which already passed muster in Japan and New Zealand, would still need to clear antitrust reviews in the U.S. and Australia.

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