Universal Music is in talks to sell off most of Parlophone, the home of acts including Coldplay, Kylie Minogue and Tinie Tempah, in order to allay concerns the European regulator has over its £1.2bn bid for EMI.
The potential sell-off of Parlophone, which would not include the Beatles' catalogue, has been submitted by the world's biggest music company as part of a package of remedies to the European Commission.
It is understood that BMG, the music publishing joint venture between Bertelsmann and KKR which missed buying EMI's publishing division, has held talks with Universal to potentially acquire Parlophone.
One source with knowledge of the situation said that any potential sale of Parlophone, one of EMI's most famous labels, would include Universal "cherry picking" key artists to keep such as the Beatles and, potentially, Coldplay.
Founded over 100 years ago, Parlophone was a leading jazz label in the 1920s. Sir George Martin joined as assistant label manager in the 50s, signing Cilla Black, Peter Sellers – and the Beatles. Other artists added to the label roster through the years are Duran Duran, Pet Shop Boys, Blur and Lily Allen.
The European Commission, which rejected Universal's first offer of label sell-offs for not addressing competition concerns, will put Universal's sweetened offer to the music industry over the course of next week to gauge reponse.
Universal originally offered to sell off labels including Virgin, which has attracted interest from Sir Richard Branson, Sanctuary, Mute - home to Nick Cave and Moby, and Co-Op.
The European Commission rejected the package, which sources say was worth about €250m, as not addressing issues over the combined group's dominance in the CD and digital music market.
"The first offer just wasn't good enough and they have bitten the bullet," said one source. "It looks like they are offering a package of about €400m, half of EMI Europe at €800m, which would see them give up roughly 5% market share in Europe".
If this is the case it would bring the combined group under 40% of the European market, the limit that has concerned regulators.
"Universal Music Group has submitted a package of remedies to the European Commission relating to its proposed acquisition of EMI Recorded Music," said a spokesman for Universal. "We believe the package fully addresses the Commission's concerns and follows our constructive discussions with regulators, independent labels and competitors. We look forward to working further with the Commission and are confident of receiving clearance."
If the sale of Parlophone is accepted by the European Commission then Universal would not have to sell off some of the other labels it had considered, such as Virgin and Chrysalis.
Joaquin Almunia, the EU's competition commissioner, has described the talks as "tough".
Universal has submitted a list of 21 potential buyers for its assets, according to a report published by Billboard.
The music giant is under immense pressure as it has guaranteed to pay EMI's owner Citibank the entire £1.2bn by the middle of September regardless of whether the deal goes through.
Universal, which is owned by Vivendi, has been given until the end of November to push the deal through.
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