ERIC Nicoli, EMI’s chairman, yesterday maintained that a deal with Warner Music could still be struck, but there was little disguising the impact of the court ruling on Sony BMG.

The EMI boss told investors at the annual meeting that his company’s $31 a share offer for Warner was still good value, hours after the European Court was casting doubt on whether any major music merger could go ahead.

There was little mention of the court judgment — as if the script for the afternoon meeting had already been written. But after the meeting, Mr Nicoli made it clear that he still held out hope.

He said that EMI would not have made a proposal to Warner if it had thought that the case could not be made. Despite yesterday’s ruling, there was “no reason, at this stage, to change that view”.

EMI believes that the Court of the First Instance’s ruling is, at this point, essentially technical — it says simply that the European Commission failed to carry out a proper analysis of the impact of the merger, and does not mean that a Warner-EMI combination is doomed.

Nevertheless Mr Nicoli made clear his disappointment, joking to investors that “I’ve got a couple of things I’d like to write to the European Commission about” and correcting reporters who said that he had been trying to pull off a Warner deal for six years. “It’s six and a half, actually,” he said.

Warner also carefully left the door open to future talks by issuing a holding statement, saying it was reviewing the ruling. But the Warner camp was more cautious, warning that it did not underestimate the regulatory risks in completing a Warner-EMI deal.

It remains possible that the European Commission will clear the Sony-BMG deal, although this could now take several months if the Commission goes to the more exhaustive second-stage inquiry. But the new verdict may result in a ruling that will give real clarity on whether Warner and EMI will be allowed to come together.

Meanwhile, neither company is struggling on its own. Warner, in particular, is emphasising that it has good momentum in its business, Last week Soundscan released figures that showed Warner increasing its share of album sales in its US heartland from 16.7 per cent to 19.3 per cent in the quieter first half of the year. It was the only major to make gains, while all other rivals went backwards.

EMI eased from 10.4 per cent to 10 per cent, leaving it firmly in fourth place. However, it is still promising its second consecutive year of revenue growth.

The British group has always been the keener of the two to do a deal, making the first approach in May, while Warner’s plan had been to wait until next year to make its own move.

That does suggest that Eric Nicoli is keen to get the six and a half year wait over with, but for now he and Warner’s Edgar Bronfman have to be patient while the Commission sets out the rules of the game.

WHAT HAPPENS NEXT?

Warner/EMI merger battle most likely on hold, until the Commission clarifies the situation

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