EMI Group and the Bertelsmann Music Group have halted talks over the planned merger of their music businesses, citing regulatory hurdles. The proposed marriage would have brought such music icons as t

EMI Group and Bertelsmann have halted talks over the planned merger of their music businesses, citing regulatory hurdles. The proposed marriage of the London-based music company with Germany's Bertelsmann Music Group (BMG) would have brought such music icons as the Beatles, Elvis Presley, Mariah Carey, the Spice Girls, and Whitney Houston together under the same umbrella.

"The companies have mutually concluded that the regulatory hurdles Brussels and Washington would most likely impose on an EMI/BMG merger would require a complicated, lengthy investigation and approval procedure," Bertelsmann said in an official statement issued this morning.

EMI conceded that in five months of negotiations, the companies had failed to forge a satisfactory accord that would appease both shareholders and antitrust bodies in Europe and the U.S.

In a statement, EMI Group chairman Eric Nicoli said, "after exhaustive analysis and discussion, we have been unable to find a deal with Bertelsmann which works both for shareholders and for the regulators." Added EMI, "It is not in the interests of shareholders, artists or employees to allow the uncertainty to continue."

"Our companies will now continue along their respective paths," confirmed Bertelsmann chairman/CEO Thomas Middelhoff.

The announcement comes amid intense media speculation of conflict among the companies' decision-makers. Escalating costs related to ongoing discussions would likely have caused a backlash from EMI's shareholders following the #43 million ($61.75 million) legal bill attached to the company's failed merger bid with Warner Music last year.

"Preliminary talks indicated that there would be significant stipulations which might have called the project's economic viability into question," Bertelsmann added in the statement.

Although a formal proposal was never delivered to the European Commission, both companies held dialogue with Brussels regulators to gauge the likeliness of approval. In a conference call with key analysts today, EMI Recorded Music VP/CFO Tony Bates explained that the rumored decision to offer the sale of Virgin would not have directly solved regulatory concerns.

According to an analyst, Bates said Brussels expected "significantly bigger" disposals. Competition authorities also expected significant publishing spin-offs, Bates said.

EMI confirmed there will be no further provision for deal costs beyond that made at the half year. The company's trading results for the year ended March 31 will be presented on May 22. In an attempt to reassure investors, EMI indicated group sales improved by 12% to almost #2.7 billion ($3.8 billion) and group operating profit improved 14% to about #330 million ($474 million). Adjusted pre-tax profits rose six percent to approximately #260m ($373 million). The company's share price rose immediately after the announcement.