Media group EMI said yesterday it was close to striking a merger deal with US giant Time Warner's music division to create the world's biggest record company.
The combination would bring together EMI's list of stars such as the Spice Girls, Rolling Stones and Robbie Williams with Warner Music's playlist including Cher, Eric Clapton and Madonna.
Full details of the partnership were due to be released today but a statement from EMI described the deal as a "50-50 joint venture", and took pains to say it would not represent a takeover of EMI.
"The transaction contemplated represents an opportunity to establish the world's premier music group and to create very considerable value for shareholders of both companies," the statement said.
The move will be the latest in a string of major global media mergers. Time Warner itself recently announced a merger with Internet giant America On Line, while EMI's shares surged last week on speculation that it was close to a deal with Germany's Bertelsmann media group.
As well as a host of famous artists, the combined company would own some of the best-known recording labels in the industry, including EMI's Virgin and Capitol and Time Warner's Atlantic, Elektra and Warner Brothers.
Executives at EMI, led by chairman Mr Eric Nicoli, were said to be meeting Time Warner management including Warner Music head Mr Roger Ames this weekend.
Warner EMI Music, as the venture is expected to be called, would have sales of more than pounds 5 billion a year and the pair could bring in cost savings of up to pounds 500 million a year by combining their overheads.
EMI has already said it is looking to cut manufacturing costs of CDs and tapes. Combining operations with Warner could allow the pair to close a number of factories.
The combined group would also have more marketing muscle to promote its artists.
Meanwhile, EMI will be able to ally itself with internet behemoth AOL.
Shopping for CDs is already commonplace over the Internet but analysts say the future for the music industry lies in downloading music directly on-line to customers.
Mr Ken Berry, chief executive of EMI's record business, is tipped to become chief executive.
It was reported that Warner and EMI executives have been in secret talks for weeks. EMI has been the subject of takeover speculation for years.
Two years ago merger talks with Canada's Seagram collapsed but a host of other media groups have since been mentioned on the City rumour mill.
Valued after the close of play on Friday at pounds 5.11 billion, EMI is Britain's 65th biggest stock market-quoted company.
Its history dates back to 1897 when it traded as The Gramophone Company but its place was assured in pop culture when it signed the Beatles in the early 1960s.
When the founding fathers of EMI set up The Gramophone Company they could not possibly have imagined that 100 years later records would become almost extinct.
Even in the 1960s, when EMI was signing up the likes of the Beatles, science-fiction B movies were not predicting we would be buying and downloading music from computers in our living rooms.
But that is the situation record companies now face.
While Internet sales of cassettes and CDs have been growing steadily for several years, especially in the US, the norm will soon be for music to be sold and distributed directly on-line.
It is partly for this reason that the City today will be warming to the joint venture agreed between EMI and Time Warner, the US group soon to merge with internet giant AOL.
EMI is the world's third biggest producer of recorded music and the largest music publisher, owning and administering more than a million copyrights.
This vast catalogue, ranging from Singin' in the Rain to the Spice Girls' Wannabe, is seen as a vast resource to sell to music fans over the Internet.
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