Commission Decision of 19/04/2012 declaring a concentration to be compatible with the common market (Case No COMP/M.6459 - SONY / MUBADALA DEVELOPMENT / EMI MUSIC PUBLISHING) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

• Published date: 19 April 2012
• Subject Matter: Competition,Concentrations between undertakings

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32012M6459

Commission Decision of 19/04/2012 declaring a concentration to be compatible with the common market (Case No COMP/M.6459 - SONY / MUBADALA DEVELOPMENT / EMI MUSIC PUBLISHING) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|EUROPEAN COMMISSION |

In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description. Brussels, 19/04/2012

C(2012) 2745

PUBLIC VERSION

MERGER PROCEDURE

To the notifying parties:

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Dear Sir/Madam,

Subject: Case No. COMP/M.6459– Sony/ Mubadala/ EMI Music Publishing

Commission decision pursuant to Article 6(1)(b) in conjunction with Article 6(2) of Council Regulation No 139/2004 [1]

1. On 27 February 2012, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 by which Sony Corporation of America and Mubadala Development Company PJSC acquire within the meaning of Article 3(1)(b) of the Council Regulation joint control of the whole of the undertaking EMI Music Publishing, which currently forms part of the EMI Group, by way of purchase of shares and assets. Sony and Mubadala are collectively referred to as “the Parties”. EMI Music Publishing will be administered by Sony/ATV.

I. THE PARTIES

2. Sony Corporation of America ("Sony") is the US subsidiary of Sony Corporation, headquarted in Tokyo, Japan. Sony, directly and through its subsidiaries, is active globally in various businesses, including electronics products (i.e. audio, video, televisions, digital cameras, personal computers and tablets), entertainment services (e.g. motion pictures, TV programming, recorded music, music publishing), financial services and a variety of other businesses.

3. Mubadala Development Company PJSC ("Mubadala") is an Abu Dhabi public joint stock company focused on investment and development which is wholly owned by the Government of the Emirate of Abu Dhabi in the United Arab Emirates. Mubadala is active in investing in a wide range of strategic sectors, including energy, utilities, real estate, basic industries and services.

4. EMI Music Publishing ("EMI MP") is the EMI Group's music publishing business.

5. Sony/ATV is not a party to the transaction but will administer the EMI MP catalogue. Sony/ATV is a music publishing company established in 1995 when Sony Music Publishing was transferred to a 50/50 joint venture with the singer-songwriter Michael Jackson, together with certain music catalogues owned by Michael Jackson. According to the Parties, Sony/ATV is jointly controlled within the meaning of the Merger Regulation by Sony and the Michael Jackson Estate and encompasses all music publishing activities of its parents.

II. THE CONCENTRATION

6. According to the transaction documents submitted by the Parties, the proposed concentration would be structured as follows. A special purpose vehicle, DH Publishing LP ("DH Publishing"), would acquire EMI MP from Citigroup. DH Publishing would be owned by two consortium companies. The first consortium company is Nile Acquisition LLC ("Sony Sub"). Sony Sub is owned by Sony ([…] shareholding) and the Michael Jackson Estate ([…] shareholding). The second consortium company is Nile Acquisition Holding Company Limited ("Mubadala Sub"). Mubadala Sub would be owned by Mubadala ([…] shareholding), Jynwel ([…]), GSO ([…]) and EMI West ([…]).

7. Mubadala Sub would have a ca. […] interest in DH Publishing and Sony Sub would hold a ca […] interest in DH Publishing.

Sony's influence over EMI MP

8. Sony would hold a […] interest in Sony Sub and would therefore be able to exercise control over Sony Sub, which in turn would own […] of the shares in DH Publishing. Although Sony Sub would only be a minority shareholder in DH Publishing, a number of important actions would require its approval. This would include the adoption of DH Publishing's budget and the annual business plan, which would be subject to unanimous approval of the shareholders in DH Publishing. The same would apply to investments in excess of USD […]. Sony would also appoint 4 out of 12 members of DH Publishing's board of directors.

9. Furthermore, Sony/ATV, which is jointly controlled by Sony, would be appointed to act as the exclusive administrator of the EMI MP catalogue. As such, it would be Sony/ATV that would decide on the day-to-day licensing of the EMI MP catalogue. Ultimately, however, Sony would be allowed to exercise its rights with regard to the EMI MP catalogue unilaterally, without recourse to the Michael Jackson Estate.

Mubadala's influence over EMI MP

10. Mubadala would own the majority ([…]) of the shares in Mubadala Sub, which in turn would own […] of the shares in DH Publishing. Mubadala would also have the right to appoint a majority (4 out of 7) of the board of directors of Mubadala Sub. However, according to a governance agreement among Mubadala Sub's shareholders, a majority of […] of the equity of Mubadala Sub would be required in order for the latter to approve the adoption of DH Publishing's budget and annual business plan or approve capital expenditures above USD […]. Therefore, Mubadala's agreement would always be necessary subject to forging alliances with either Jynwell or GSO in order to approve these measures.

11. […]. In addition there are various arrangements, […], that would strengthen its de facto influence over decisions taken in relation to the EMI MP repertoire.

Joint control by Sony and Mubadala over EMI MP

12. Control is acquired if an undertaking can exercise decisive influence over the strategic commercial behaviour of another undertaking. [2] A minority shareholder may be deemed to have control on a negative basis if it is able to block the adoption of strategic decisions in an undertaking without having the power, on its own, to impose such decisions. [3] Since this shareholder can produce a deadlock situation, the shareholder acquires decisive influence within the meaning of Article 3 (2) and therefore control within the meaning of the Merger Regulation. [4]

13. In the event of a minority shareholding, control may occur in situations where specific rights attached to the shareholding, such as additional rights enabling the minority shareholder to determine the strategic commercial behaviour of the undertaking to be acquired or majority requirements for strategic decision, in fact confer a veto right upon the minority shareholder. [5] Veto rights that confer joint control typically include decisions on issues such as the budget, the business plan, major investments or the appointment of senior management. [6] By contrast, veto rights that are normally accorded to minority shareholders in order to protect their financial interests as investors are usually insufficient to establish control. [7]

14. In the present case, both Sony and Mubadala would enjoy rights that enable them to block strategic decisions that determine the strategic commercial behaviour of DH Publishing and hence EMI MP. Sony, as an indirect minority shareholder in DH Publishing would be granted a veto right with regard to the adoption of DH Publishing's budget, the company's annual business plan and investments in excess of USD […]. At the same time, Sony/ATV, which is jointly controlled by Sony, would act as the administrator of the EMI MP catalogue.

15. Mubadala would enjoy a veto right that is identical to Sony's and in addition have the right to block any important investment proposed by Sony/ATV.

16. The Commission finds that in addition Mubadala would enjoy sole control over Mubadala Sub. The Commission reaches this conclusion in view of Mubadala's right to determine the majority of the members of the board and its ability to forge changing alliances either with GSO or Jynwell, depending on its interest. In contrast to the situation of joint negative control, sole negative control can exist if no other shareholders enjoy the same level of influence as the shareholder that is always needed to forge a majority. The shareholder enjoying negative sole control does not necessarily have to cooperate with specific other shareholders in determining the strategic behaviour of the controlled undertaking. This would be the case for Mubadala with regard to Mubadala Sub.

17. In light of the above, the Commission concludes that the proposed concentration would confer upon Sony and Mubadala joint control over DH Publishing and hence EMI MP.

III. EU DIMENSION

18. The undertakings concerned have a combined aggregate worldwide turnover of more than EUR 5 000 million (Sony: EUR 61 779 million; Mubadala: [> EUR 5000 million]; EMI MP: [>EUR 500 million]). The aggregate EU-wide turnover of each of at least two of the undertakings concerned is more than EUR 250 million (Sony: [>EUR 10000 million]; Mubadala: [>EUR 4000 million]; EMI MP: [>EUR 200 million]). The proposed transaction therefore has an EU dimension.

IV. RELEVANT MARKETS

1. Background

19. Music publishers are active on two market levels. Upstream, they are active in the supply of publishing services to authors. These services include signing authors and providing them with financial, marketing and career support. As a counterpart to these services, authors transfer the rights in their musical work to the publisher or grant that publisher an economic interest in the musical work by providing the publishers the right to obtain a certain portion of the royalties collected. Downstream, music publishers are active in the exploitation of works of authors under contract or for a...