EMI - the music group behind Apple's DRM (digital rights management) free iTunes - has agreed to be bought by private equity firm Terra Firma for £3.2bn. EMI has been the subject of bid speculation for the past year as its business has struggled. In early April EMI and Apple announced the sale DRM-free versions of EMI artists' songs through Apple's online iTunes store.
EMI previously rejected a takeover bid from rival Warner Music. Warner has come out against DRM-free music. But, speaking a few weeks ago, EMI wouldn't comment on what might happen to the DRM-free music if the company was bought.
DRM-free tracks from EMI are offered at 256kbps AAC encoding and for just 99p per song. iTunes users are also able to upgrade their entire library of all previously purchased EMI content to the higher quality DRM-free versions for 20p per song.
The DRM-free iTunes files don't change the law on illegal sharing of copyrighted music. But they mean there's no limit on the types of devices or number of computers that purchased iTunes songs from EMI artists can be played on.
EMI's artists include some of the biggest names in music both past and present: The Beach Boys, Pink Floyd, Janet Jackson, Robbie Williams, Depeche Mode, Iron Maiden, The Rolling Stones, Al Green, Moby and Queen.
Analysts said the move was likely to bring other bidders into the fray, potentially including Warner Music. EMI has seen sales decline dramatically in recent months and said last week that it had made a £260m loss in the past year. News of the Terra Firma bid sent EMI's shares up 9 percent.
EMI's directors recommended the 265-per-share offer from Terra Firma be accepted, but the deal must be approved by the firm's shareholders.
The deal values EMI shares at £2.4bn and including debt, it is worth £3.2bn. EMI said it had received a number of different offers but that the Terra Firma bid was the most "attractive".
Analysis: iTunes and DRM-free music explained