Will Apple buy Universal Music Group?

Weekly Corporate Growth Report, May 5, 2003

Will Apple Buy Universal Music Group?

Steve Jobs, the chief executive of Apple Computer Inc., has been in discussions with French conglomerate Vivendi Universal SA concerning a possible acquisition of its Universal Music Group. The deal, if it happens, may be either an outright acquisition for $5 billion to $6 billion, or an equity investment.

Shareholders have not be positive about the idea of buying Universal Music, and the company's stock price fell eight percent when the talks were announced.

The deal may also threaten a new online music service that Apple has in the works. Apple already has approval from the five major music labels (including Universal Music) to offer their songs online. Buying Universal would change the balance of power and could alienate the other four labels.

The deal is by no means a sure thing. Apple is known for keeping its strategies and plans quiet. And while the company has previously shown interest in electronic media distribution, it has never sought to be an owner of media content.

Antitrust Procedures in EU to Change

Mario Monti, the European Union antitrust chief, has announced changes in the way mergers will be scrutinized. The European Commission's 13-year-old Merger Task Force is being broken up, and its officials dispatched to other units.

The changes are part of an overhaul that will place more antitrust matters in the hands of national authorities.

The changes come after a number of Commission decisions have been overturned in appeals to the EU's top courts. Mr. Monti has stated that he has no plans to fire any of the officials whose decisions have been challenged.

DOJ Takes Action Against Dairy Farmers

The Department of Justice has launched an antitrust case against Dairy Farmers of America (DFA), asking a federal judge to require the giant milk cooperative to sell its recently acquired Southern Belle Dairy.

The Department's antitrust agency is also concerned about the recent acquisition of National Dairy Holdings by H.P. Hood Inc. Diary Farmers of America has a 92 percent preferred equity interest in H.P Hood and has limited rights to approve contracts entered into by the company.

DFA is a cooperative of dairy farmers that invests in dairies and obtains exclusive milk supply contracts. Regulators contend that DFA may be violating antitrust law by forcing competitors out of the milk supply market.

Southern Belle competes with National Diary to supply milk to school districts in Kentucky and Tennessee. DFA has "control and influence" over significant business decisions at both dairies, according to the DOJ suit.

Berkshire Hathaway Increases PetroChina Stake

Berkshire Hathaway raised its stake in the PetroChina Company three times in April 2003. PetroChina is the largest oil producer in China. Berkshire Hathaway, the investment vehicle for billionaire Warren Buffet, now owns 9.1 percent of the company's publicly traded stock, or 0.9 percent of the company. China's government owns a 90 percent stake.

Radyne ComStream Sues Over Tender Offer

Radyne ComStream Inc. has instigated a lawsuit aiming to compel Wegener Corporation to approve its $19.1 million tender offer. Radyne is offering to acquire Wegener for $1.55 per share, but Wegener's board has rejected the bid. The lawsuit seeks to block Wegener from adopting or enforcing any defensive measures designed to impede the acquisition or impede the voting rights of Wegener shareholders.

Wegener currently has antitakover measures in place, including a provision that would prohibit Radyne from merging with Wegener without board approval unless the deal is approved by 80 percent of Wegener's shareholders.

Smith & Nephew Delays Bid

Smith & Nephew PLC delayed the official launch of its planned takeover bid for Centerpulse AG "Owing to the volume of documentation submitted in relation to the transaction, the responsible stock market authorities have requested an additional week of review time," Smith and Nephew said in a statement.

Smith & Nephew is a British medical devices company. Centerpulse is a rival company, based in Switzerland. Smith & Nephew agreed to buy Centerpulse in March for about $2.3 billion. The deal is still expected to proceed.