U.S. and European Regulators Approve Universal’s Purchase of EMI

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For the Universal Music Group, months of uncertainty came to an end on Friday when it received regulatory clearance in Europe and the United States for its $1.9 billion takeover of EMI Music.

Next week the deal is set to close, and Lucian Grainge, Universal’s chairman, plans to address the EMI staff in Los Angeles as its new leader.

But serious questions about the deal remain to be answered, for Universal as well as for artists and consumers around the world.

On Friday, after negotiations that lasted through the summer, the European Commission approved the deal under the condition that Universal sell a third of EMI’s assets. Those include Parlophone and various other labels in Europe, as well as the rights to release music around the world by some of EMI’s most famous acts, including Coldplay, David Guetta and Pink Floyd.

The Federal Trade Commission also gave its clearance on Friday, with no added demands.

“It’s a historic day for UMG, and a historic day for EMI,” Mr. Grainge said in an interview. “Inevitably I’m disappointed that we were not able to retain Parlophone. However, I can only remain focused on the opportunity and the achievement.”

Where EMI’s castoffs end up may not be known for months. According to a memo to EMI employees sent on Friday by Roger Faxon, its chief executive, once Universal completes its takeover of most of EMI, artists on labels to be sold will fall under the authority of a “hold separate manager” that will report to a trustee for the commission. (In that memo, Mr. Faxon also announced that he would resign next week.)

The sale process can take six to nine months, and potential buyers must have “a proven track record in the music industry,” which would exclude private equity and other bidders.

Joaquín Almunia, the European competition commissioner, also stressed at a news conference in Brussels that Universal must sell at least two-thirds of the EMI assets it must dispose of to a company that can serve as a credible competitor.

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Likely buyers include Warner, Sony and BMG Rights Management, a joint venture between Bertelsmann and Kohlberg Kravis Roberts. Various independents and entrepreneurs in music are also likely to bid.

The decision by the European Commission and the F.T.C. was criticized by many of the consumer and independent music groups that have been speaking out against the deal for months. Among their concerns are that Universal, already the largest music company, would gain so much control over the music market that it could dictate terms to new digital services.

“It’s good to see that the commission has seen this deal as such a threat to the market that it has demanded and received truly swinging commitments on divestments,” said Martin Mills, chairman of the independent Beggars Group. “However, that should not conceal that fact that Universal’s arrogance has paid off for them, that they have destroyed a significant competitor, and that even with these divestments their ability to dominate and control the market has reached even more unacceptable levels.”

Jodie Griffin, staff attorney at Public Knowledge, a digital rights advocacy group, said that by failing to block the merger, “the F.T.C. is allowing UMG to acquire unprecedented market power and amass a dominant collection of copyright holdings. UMG can now use those holdings not just to raise prices for consumers, but also to create a new tax on innovation among digital music services.”

For Universal, which agreed to pay Citigroup the full price of EMI regardless of regulatory approval, the value of the deal will be decided by how much the disposed assets will fetch at auction.

The value of the assets to be disposed is not clear. The labels in Europe are said to generate about $450 million in annual revenue there, but global rights could add considerably more.

“We’ve had enormous interest from the usual suspects,” Mr. Grainge said. “Bertelsmann has been a very aggressive entrant, and there are other trade buyers — experienced, well-known music professionals. We’re in discussions with all of them.”

To avoid losing money, Universal and its parent company, the French conglomerate Vivendi, would need to sell assets for as much or more than they paid. According to Vivendi, it paid seven times earnings, a high but not extraordinary price by the standards of other recent music sales.

Some analysts believed that the deal may turn out well for Universal, and that the company will still be likely to find significant savings through the merger, even with disposals.

“In many ways, Universal and EMI must be reasonably happy,” said Claudio Aspesi, a media analyst at Sanford C. Bernstein & Company in London. “They would probably prefer to buy the whole thing, but still they are much better of than they were yesterday.”