Sony BMG cleared to buy BMG and become SMEI

By Tim Conneally | Published September 16, 2008, 1:27 PM

The European Commission yesterday gave permission for Sony to buy full ownership of Sony BMG, turning the former joint venture with German media conglomerate Bertelsmann AG into a Sony property.

In August, joint partner Bertelsmann agreed to sell its stake in Sony BMG, turning the rights to all but about 200 of its artists to the re-named Sony Music Entertainment Inc. (SMEI). This gave Sony 100 percent control of the label. Bertlesmann is said to be earning $1.2 billion in its divestiture.

Yesterday, the European Commission approved the transaction, which also includes $300 million cash from Sony BMG's balance sheet. In the joint company's brief four years of existence, it faced repeated opposition from independent publishing association Impala, which claimed the marriage of the two companies was anti-competitive.

While the EC unconditionally signed off on the merger several times that it posed absolutely no competition problems, Sony's acquisition of BMG's stake now makes it the second largest music company in the world.

In a statement to the media, Impala's co-founder Michel Lambot said, "The Commission needs to completely reassess its view of the music market.  They have just let the world's largest consumer electronics company merge with the second largest music company without any detailed investigation."

Since the August announcement, Bertelsmann has otherwise remained stable, with operations reporting marginal losses attributable mostly to market conditions and negative exchange rates. The Germany-based multinational media corporation owns broadcasting group RTL, magazine publisher Gruner + Jahr, Random House Publishing, Direct music and book club, and communications and media group Arvato AG.

In its quarterly meeting at the end of August, Chairman and CEO Hartmut Ostrowski emphasized the group's "high level of creativity and entrepreneurial drive" in Internet and mobile phone innovations.