Continued from page 1

Citigroup had put EMI up for sale in June, four months after it foreclosed on private equity firm Terra Firma. Terra Firma bought EMI in 2007 in a $6.8 billion acquisition financed with debt from Citigroup, but it couldn’t make enough money to keep up with the terms.

Vivendi believes it is swooping in to buy a troubled asset at an “inflection point” in the music industry, Levy said. Thanks to gains in digital track and album sales, overall U.S. album sales are up 5.2 percent at 360 million units so far this year, according to SoundScan. At this point last year, overall album sales had plunged 10 percent.

Vivendi expects to cut costs and save more than $150 million a year _ making the deal profitable even if the music industry doesn’t grow in the future. Vivendi expects the deal to boost its profits in the first year after regulatory approval.

Morningstar analyst Allan Nichols, who covers Vivendi, viewed the deal with trepidation on fears that the music industry could resume its decline and that regulators could reject it.

But antitrust regulators could be more lenient of big tie-ups when the music industry is struggling to recover from more than a decade of online piracy, he said.

Also, Vivendi is paying less per dollar of earnings than Access Industries’ Len Blavatnik did when he took Warner Music Group Corp. private for $1.24 billion in July.

“The catalog is very impressive, and they didn’t pay a whole lot,” Nichols said.

Sony/ATV’s interest in expanding its library is due to the stability of licensing music copyrights, a business that has been profitable over the years because it relies on business customers like filmmakers instead of individual consumers.

Sony/ATV plans to reap new revenues from the EMI catalog, which includes around 100 No. 1 hits from Motown artists Smokey Robinson, Marvin Gaye, Stevie Wonder and The Supremes.

“We think there are biopics and life stories yet to be told about them,” said Sony/ATV Chief Executive Marty Bandier in an interview. “There’s a depth and quality to this asset that can’t be compared to anything.”

In a move that may appease regulators in Europe and the U.S., Vivendi said it would sell 500 million euros ($680 million) worth of non-core assets, mostly minority stakes in companies that it did not disclose. Strategic bidders that lost out on the auction, such as Warner Music, are expected to vie for those assets.

Vivendi said that London-based EMI would find a safe home at a company headquartered not far away in Paris.

“For me, as an Englishman, EMI was the pre-eminent music company that I grew up with,” Universal CEO Lucian Grainge said in a statement. “UMG is committed to both preserving EMI’s cultural heritage and artistic diversity and also investing in its artists and people to grow the company’s assets for the future.”

Grainge said on the conference call that he would ensure the famous Beatles’ recording studio, Abbey Road Studios, would remain open as a “symbol of British culture.”

Universal released statements from bands in support, including from Coldplay manager Dave Holmes, who said “this can only be a positive for the artists and executives at EMI.”