Universal to buy EMusic for £17m
Published: 09 Apr 2001 16:04 BST
Recording giant Universal Music Group, a unit of Vivendi Universal, said Monday it will acquire online music service EMusic.com for $24.6m in cash in an effort to fulfil the label's Internet ambitions.
Under the terms of the deal, Universal will pay 57 cents in cash for each of EMusic's 43.2 million outstanding shares. EMusic closed at about 44 cents at the end of the trading day Friday.
Shares of EMusic surged 23 percent to 54 cents in early trading Monday.
On Thursday, EMusic announced that it was in acquisition talks with "a major music company", but declined to name the suitor. A source close to the deal on Friday confirmed Universal as the likely acquirer.
EMusic, an early seller of MP3 downloads, has struggled to persuade consumers to buy digital songs or subscribe to its catalogue of independent artists. Many of its problems were fuelled by the popularity of Napster, the free music-swapping service that the recording industry is suing.
With the acquisition, Universal will gain EMusic's catalogue of 165,000 tracks and licensing agreements with 700 independent record labels. Universal will also control EMusic's editorial sites RollingStone.com and DownBeat.com.
Universal has recently inked some aggressive deals to step into the online music market. For one, Universal and Sony Music Entertainment have teamed to create an online music-subscription service dubbed Duet. Last week, Duet announced a nonexclusive agreement to offer its services through Web giant Yahoo!. It has also allowed online music company RioPort to sell Universal songs for downloads through Viacom's MTVi Group, which runs MTV.com and VH1.com.
The cash offer will go into effect by 20 April, when Universal files with the Securities and Exchange Commission. The deal also includes conditions that EMusic will own at least $5m in cash and securities by 30 April and will not depreciate more than $48,000 for each day after the offer closes.
Either company can scrap the deal if it's not completed by 25 June.
"We feel that EMusic complements Universal's other digital and Internet initiatives and we look forward to joining with them to offer music lovers more and more compelling online destinations and experiences," Larry Kenswil, president of Universal Music Group's eLabs, said in a statement.
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