EMusic-Universal Deal Details Disclosed

By | April 10, 2001 at 12:00 AM

Universal Music Group, confirmed today that it intends to buy EMusic.com Inc. for nearly $23 million cash. News of the possible acquisition surfaced late last week, but rumor that the proposed buyer was Universal, a unit of France’s Vivendi Universal, could not be verified until the music giant’s announcement of the deal. The company intends to start a tender offer for EMusic’s outstanding shares for 57 cents each. With the news, shares of EMusic, whose sites include RollingStone.com and DownBeat.com, were trading at 53 cents, up 10 cents from Friday’s close. Prior to EMusic’s disclosure of its acquisition talks, its shares traded as low as 16 cents.

Announcement of the proposed deal follows the formation last week of the Duet service, a joint partnership between Yahoo!, Universal, and Sony Music Entertainment. What remains unclear is whether EMusic will become a part of the Duet service or continue to exist independent of other digital initiatives proposed by the music giant. EMusic’s subscription service is similar to the one being designed for Duet, but has the advantage of having a proven and established infrastructure that consumers are already using. EMusic had hoped to emerge as the legal alternative to Napster, but the legal wrangling of the file-swapping leader lasted longer that EMusic had the funds to outlast.

EMusic said last week it would finish its fiscal third quarter with 10,000 subscribers, ahead of the 8,000 subscribers the company had earlier expected. As of March 31, the company had $10.9 million in cash and short-term investments.Ý

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