CDNOW's Merger with Columbia House Faces Delays Amid FTC Review

Strategic Insights -

CDNOW, a leading online music retailer, has announced that its proposed merger with Columbia House, owned by Time Warner and Sony, is facing additional scrutiny from the Federal Trade Commission (FTC). The FTC has requested more information from the two companies, extending the review period and potentially delaying the merger's closure. Despite this setback, CDNOW remains optimistic that the deal will still close in the first quarter of 2000. The merger, first announced in July 1999, would result in a new public company owned 37% each by Sony and Time Warner, with CDNOW's existing stockholders holding 26%.

Key Takeaways:

  • The Federal Trade Commission (FTC) has issued a Request for Additional Information to Time Warner Inc. and Sony Corporation under the Hart-Scott-Rodino Antitrust Improvements Act in connection with its review of CDNOW's proposed merger with Columbia House.
  • The FTC's request extends the review period until 20 days after Time Warner and Sony comply with the request.
  • CDNOW has been assured by Time Warner and Sony that they remain committed to the merger and are actively working to resolve issues related to the FTC's request.
  • The merger, proposed in July 1999, would result in a new public company owned 37% each by Sony and Time Warner, with CDNOW's existing stockholders holding 26%.
  • CDNOW offers over 500,000 music and entertainment-related items, including CDs, DVDs, videos, and music downloads, as well as music samples and intelligent album recommendations.
  • The company's existing stockholders will own 26% of the new public company resulting from the merger.
  • CDNOW has entered into a definitive agreement with Sony Corporation of America and Time Warner Inc. to merge with Columbia House.

Statistics:

  • CDNOW offers over 500,000 music and entertainment-related items.
  • The merger would result in a new public company owned 37% each by Sony and Time Warner, with CDNOW's existing stockholders holding 26%.
  • The review period will be extended for 20 days after Time Warner and Sony comply with the FTC's request.
  • The merger's closure is expected in the first quarter of 2000.

Sources:

  • [CDNOW Press Release, Nov. 24, 1999]
  • [Federal Trade Commission (FTC) - Hart-Scott-Rodino Antitrust Improvements Act]
  • [Private Securities Litigation Reform Act of 1995]