UNIVERSAL Music, Warner and Viacom have emerged at the front of the pack chasing the $1.5 billion (£790 million) music publishing arm of Germany’s Bertelsmann.

The three are all understood to have submitted second round bids before Thursday night’s deadline, in a race that has seen several private equity buyers fall away.

BC Partners, which had previously been a contender, is thought to have pulled up, while uncertainty hovers over the bid from the Chicago-based private equity firm GTCR Golder Rauner, fronted by Charles Koppelman.

Viacom has linked up with Apollo Management, a venture capital group. Viacom did not get through the first round, but by joining Apollo it has been given a second chance in a bid fronted by Strauss Zelnick.

Kohlberg Kravis Roberts (KKR) and EMI were also contemplating a joint bid, although industry sources said that the chances of the combination putting in a bid were 50-50, while Sony is seen as the least likely of the music majors to participate.

The auction is being conducted by JPMorgan and Citigroup, but there is unlikely to be any further progress until towards the end of next week. The banks may hold a further round of bidding, depending on how close the second round bids are.

Victory for a music company, or for Viacom, could test the patience of Brussels, however. Bertelsmann is insisting that the buyers bear the risk of getting regulatory clearance, but no one has before tried to cut the number of music publishers from the existing five to four.

Viacom’s ownership of MTV, the music television station, could create problems. Although it owns only a modest publishing arm in Famous Music, taking control of third-ranked BMG Music Publishing could leave it open to accusations that MTV would favour playing BMG-published songs.

Already the European Commission has to rule again on the question of whether the separate Sony BMG recorded music joint venture is legal, after Impala, the group of independent labels, had the deal’s regulatory clearance overturned in court. Impala has said that it will also challenge any trade takeover of BMG Music Publishing.

Music publishing covers the copyright to songs. Songwriters and their publishing companies receive royalties each time a song is played. EMI is the world’s biggest publishing operation, followed by Warner’s Warner/Chappell. Universal is weak in publishing and its French owner, Vivendi, is eager to expand in that area.

WORKING UP THE CHARTS

Built up agressively by acquisition since 1987, the German unit has bought up 250 catalogues, including songs by Pete Waterman, Robert Smith, from The Cure, and Christine McVie from Fleetwood Mac — and the spending spree has helped it to boost revenues by 13 per cent a year on a compound basis over the past 17 years.

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