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Branson considers Virgin Records bid

by Jonathan Braude in London and Renee Cordes in Brussels | Published July 17, 2012 at 3:01 PM

British entrepreneur Richard Branson founded Virgin Records in the days when records were made of vinyl and his less ambitious contemporaries could get high and spend hours watching them go round and round.

Now he, too, has come full circle. If Vivendi SA's Universal Music Group spins out Virgin Records to secure regulatory approval for its £1.2 billion ($1.87 billion) takeover of EMI Group Ltd., Branson and his Virgin Group Ltd. might consider buying back a stake in the label he sold to EMI in 1992.

"Richard Branson and Virgin have been assessing how to get back into recorded music business for many years," a Virgin Group spokesman said in an e-mailed statement. "The potential disposal of Virgin Records by Universal Music offers a wonderful opportunity to recreate a dynamic independent label in the market."

The trains-to-space-travel group was responding to an article in the Financial Times on Tuesday, July 17, reporting that Branson had held talks with French music industry entrepreneur Patrick Zelnik. Zelnik, who launched the French operations of Virgin Records in 1980 and now runs the French independent label Naïve Records, told the newspaper he had Branson's backing for a bid if he made one.

He said that if Universal was ready to sell, Branson would "support a transaction and support me in doing it."

However, a source close to the situation pointed out that neither Branson nor Virgin had made a formal approach to Universal or its French parent, Vivendi, and that Virgin Group's carefully worded statement does not commit him to do so.

A spokesman for Universal declined to comment. But Zelnik's claims came as he also seemed to perform a U-turn on the EMI takeover. Zelnik is co-president of the independent record labels' European lobbying organization Impala, which has long fought against concentration in the music industry. Impala has supported the European Commission's competition regulator in its investigation of the merger.

Yet in a separate commentary in the FT (in which he said EMI had been "ravished" by private equity, a reference to its short-lived ownership by Terra Firma Capital Partners Ltd.), Zelnik admitted the merger could "create a more competitive industry, while offering stability to EMI's artists."

Impala swiftly distanced itself from Zelnik's position, pointing to a board vote the previous night, in which the organization voted to continue its opposition to Universal's takeover of EMI.

"Our board took a clear decision yesterday to continue its opposition to the Universal/EMI merger, rejecting remedies which do not deal with the specific problems set out in the EC's statement of objections," said Impala executive chairwoman Helen Smith, arguing that excessive concentration in the music sector would help Universal "mold services toward its own interests and obtain more than its fair share of exposure."

She added: "We all respect Patrick Zelnik's view, but the FT article is the Naïve position, not the Impala position."

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Branson considers Virgin Records bid

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