Universal Soldiers On With Music Deal

AT&T bet $4 billion it could purchase rival T-Mobile USA without interference from antitrust regulators. It lost. Now, Vivendi's Universal Music Group is making a similar wager that could prove even more painful. In November, Universal Music won an auction to purchase EMI Group's recorded-music business from Citigroup for $1.9 billion. As part of the transaction, Universal Music made an unusually bold commitment to pay the full amount—even if regulators block the deal. If things go wrong, how much could Universal Music lose? Unlike the AT&T deal, which included a fixed payment to T-Mobile, the amount of pain that Universal Music might incur depends on how much another buyer would pay for EMI. Effectively, EMI would go back on the auction block. If it fetched less than $1.9 billion, Universal Music would be on the hook to make up the difference. The trouble is that a second auction could be less competitive.