Universal Music Group has started the integration of its newly-acquired V2 Music Group.

Moving forward, the British arm of V2 will be aligned with Mercury Records under Mercury U.K. president Jason Iley.

UMG is committed to absorbing some of the approximately 50 staff at London-based V2, but, according to a statement on the restructuring, "regrettably, it does mean that there will be redundancies at V2."

The future is also unclear for the teams at V2's smaller affiliates in markets such as France, Germany and Italy. "Some of those people and artists, as appropriate, will be coming into Universal Music in those territories," says a source close to the deal.

In its statement, UMG continued that it is "confident that V2 and its artists have a strong future," and point to the success of V2's linchpin, Welsh trio Stereophonics, whose new album "Pull the Pin" opened at No. 1 this week on the Official U.K. Albums Chart. V2's roster includes Ray Davies and Paul Weller.

Sources say V2 Music Group Tony Harlow will continue to play an important role with his new employer. Harlow, former managing director of EMI Australia, was one of the chief architects behind the sale of V2 to UMG this summer.

UMG has also vowed to continue the Co-operative Music pan-European label-licensing network, which was established in-house by V2 in late 2005 and represents such labels as Wichita, Bella Union and City Slang.

"This commitment is international in scope, and will give new resources and new energy to the V2 identity, its heritage and its artists," explains UMG in its statement.

Richard Branson and Virgin Group launched V2 in November 1996, four-and-a-half years after the entrepreneur sold Virgin Records to Thorn EMI for £560 million ($804 million).

Branson Virgin Group sold a chunk in V2 Records to Morgan Stanley in 2002, and disposed its remaining stake to the U.S. investment bank in May 2006. UMG reached an agreement to buy V2 from Morgan Stanley on Aug. 10. The U.K.'s Office of Fair Trading has since launched an investigation into that deal.

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