EMI Group Plc, home to the Beatles and Coldplay, agreed to a £2.4 billion (US$4.7 billion) takeover by a private equity group on Monday, but the deal raised speculation of an all-out bidding war for the struggling music group.
EMI, which has long flirted with Warner Music Group Corp, said that Terra Firma's offer was the best among a number of proposals it received.
However, analysts said that the £2.65 (US$5.23) per share offer for the company from private equity group Terra Firma Capital Partners could flush out a higher offer from Warner Music, already reportedly looking at EMI's books, or other potential bidders.
EMI's shares soared on the news, which was made just before the closing bell on the London Stock Exchange, finishing 8.5 percent higher at £2.69.
"The global music industry is undergoing significant change and, whilst EMI is confident in its ability to deliver its recently announced restructuring plans, significant uncertainty exists as to the timing and extent of future market developments," EMI chairman John Gildersleeve said.
"Terra Firma's offer is the most attractive proposal received and delivers cash now, without regulatory uncertainty and with the minimum of operational risk to the company," he added.
Unlike a tie-up with Warner Music, a private equity deal would be untroubled by regulatory hurdles and could be completed much more quickly.
Music companies have been looking to consolidate as the market for physical CDs declines rapidly. The International Federation of the Phonographic Industry estimates that overall music sales fell about 3 percent last year as a doubling in digital sales failed to compensate for falls in physical CD sales and digital piracy.
EMI is struggling more than most, as highlighted by its annual earnings release, which it brought forward by two days to accompany the takeover announcement.
The company reported a net loss of £288.5 million, following a profit of £86.1 million last year. The net loss was caused by a charge of ?416 million related to restructuring costs, amortization and financing costs.
Warner last made a formal approach earlier this year, a £2.1 billion offer that was rejected by EMI.