Warner again signals interest in buying EMI

It may sound like a broken record, but Warner Music Group on Tuesday again said it wanted to acquire struggling EMI Group.

The prospective deal, which would put Madonna, the Red Hot Chili Peppers, the Beatles and Norah Jones under the same umbrella, marks the latest twist in a six-year mating dance between the two companies.

Britain’s EMI and New York-based Warner are the smallest of the music industry’s four major companies, and they see meshing as a way to help pull out of an industrywide slump. “It is not surprising that these companies that are struggling in their core business are trying to leverage the synergies of a merger,” said Richard Greenfield, an analyst with Pali Research in New York.

Past potential deals between the two companies failed in 2000 and 2003. Round 3 withered this summer when a European court annulled approval of a 2004 tie-up between Sony Music and Bertelsmann’s BMG, dampening hopes that a proposed $4.6-billion Warner-EMI combination would pass muster.

But the odds may be better this time. For starters, Warner has received the blessing of the Independent Music Publishers and Labels Assn., a European trade group that has been vocal in opposing potential mergers.

In addition, analysts say that both companies’ financial woes -- Warner reported a 74% drop in its quarterly profit; EMI cut its revenue and profit forecasts for the second time in two months -- might sway regulators.

EMI confirmed that it had received an approach from Warner but said that there was “no proposal currently for the EMI board to consider.” Potential buyers have been circling EMI, including a private equity firm.

Warner approached EMI on Jan. 24 after it had received support from the music association, according to a company statement, and believes there is “compelling strategic, commercial and financial logic in a combination of the two companies.” In its agreement with the association, Warner committed to strengthening the independent music sector through a host of initiatives including contributing to Merlin, a new licensing agency that helps independent artists sell music digitally.

A combination would have to be approved by the European Commission. Last summer, European courts annulled the 2004 marriage of Sony and BMG after the commission had approved it. But the landscape may have changed since then.

“I am quite optimistic that [regulators] will support this,” said Patrick Zelnick, chairman of the Independent Music Publishers and Labels Assn., in a phone interview from Paris. A combined Warner-EMI that allies itself with independent labels could change the face of the industry, he said, by standing up to hardware companies such as Apple Inc. that set music prices.

Some observers were skeptical. Although regulatory bodies listen to all industry participants, “usually no one participant is strong enough to individually influence the outcome,” said Keith Shugarman, chairman of the antitrust practice at Goodwin Procter in Washington, D.C., about the music association’s role in the potential combination.

But the shift to digital that has crippled the industry might be enough to persuade regulators to let this deal go forward, said Jonathan Rubin, an antitrust lawyer at Washington, D.C.-based Patton Boggs, because labels have less control setting prices than they did in the past.

alana.semuels@latimes.com