Universal Music's £1.2bn acquisition marks end of the road for EMI

Universal Music has triumphed in the auction of EMI's recorded music division, home to the Beatles, Coldplay and Tinie Tempah, tabling a knockout offer of £1.2bn ($1.9bn).

The deal is about $500m more than that offered to owner Citigroup by rival Warner Music, which pulled out of the running a week ago, and marks the end of the road for the British company as a music major.

Friday's sale is the first part of the break up of EMI, with the music publishing division tipped to go to a consortium led by Sony for about $2.2bn.

BMG Rights Management, a joint venture between Bertelsmann and private equity group KKR, has tabled a rival bid of $2bn which poses no regulatory risk.

Universal, the world's biggest record company, is aiming to beat the inevitable regulatory investigation into the acquistion by selling off €500m (£429m) of "non-core" assets such as small catalogues and stakes in minority ventures.

The deal is certain to spark criticism that the disappearance of EMI to a French owner – Universal is owned by French media giant Vivendi – leaves Britain without one of the major global record companies for the first time since EMI was founded in 1931.

Lucian Grainge, chief executive of Universal Music, attempted to head-off some of the inevitable criticism by highlighting his British background and pledging to keep the iconic Abbey Road Studios intact.

"Abbey Road Studios are a symbol of EMI, a symbol of British culture, a symbol for the creative community of exactly what the company is and we are [now] part of," he said in a call with analysts and the media. "For me, as an Englishman, EMI was the pre-eminent music company that I grew up with. [Universal] is committed to both preserving EMI's cultural heritage and artistic diversity."

Universal said that it expects to achieve £100m a year in synergies from a combination of Universal Music and EMI.

The company added that it was "very confident" that it will be able to get the deal through a regulatory investigation that could take up to year, saying that it expects "deep and fruitful dialogue".

Vivendi Universal – which earlier this week benefited from bumper third-quarter results from Activision Blizzard, the company behind the top-selling game Modern Warfare 3 released on Tuesday – said that the deal would not require it to raise funds through a rights issue.

The company added that it expected to be able to maintain its credit rating, helped by the sell-off of €500m of Universal Music non-strategic assets, and to increase its full-year dividend.

Stephen Volk, chairman of the board of EMI Group and vice chairman of Citigroup, said that the deal "accomplishes Citi's objective of maximising the value of EMI".

"[This gives] EMI Music a partner in Universal Music that appreciates EMI's rich cultural legacy, its incredible stable of musical talent, and its employees who work so hard to deliver successful outcomes for the artists they represent," he added.

Dave Holmes, the manager of one of EMI's leading acts, Coldplay, said that the deal "can only be a positive" for EMI.

"I look forward to working with the Universal team," he added. "They have assembled the most talented group of executives in the industry today and their success speaks for itself. This can only be a positive for the artists and executives at EMI."

Mick Jagger, whose dislike of former EMI owner Guy Hands is well-known, said that he "particularly welcomed" the new owners. The Rolling Stones switched from EMI to Universal in mid 2008 during Hands's tenure at the company.

"This is a very positive development and I particularly welcome the fact that EMI will once again be owned by people who really do have music in their blood," he said.

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