BMG explores tie-up with Sony Music

BMG has reached out to Sony Music executives to explore a possible merger after failing to pin down a deal with its rival Warner Music.

BMG, the smallest of the top five music companies, is understood to want talks with Sony Music, as Warner turns its attentions to a possible deal with EMI, although official talks have not yet started.

Sony Music, which has had informal conversations with most of the top five music companies this year, has made clear it is in no hurry to do a deal and would probably only be interested in an outright purchase at an attractive price.

An exclusivity agreement between Warner and BMG lapsed last week as talks stalled on issues including valuation and the roles senior executives would play in a merged group."The minute the exclusivity lapsed, it became open season for everyone to talk to everyone," one person said.

EMI, the world's third biggest music company whose roster includes the Rolling Stones and Radiohead, has since confirmed it is talking to Warner Music about a takeover of its recorded music business.

"[AOL Time Warner executive] Jeff Bewkes wants the EMI deal with Warner to happen. He wants an exit from music," one source familiar with the situation told Reuters' news agency yesterday.

An EMI-Warner deal would see the exit of Warner Music's chief Roger Ames, who would not want to work with EMI's head of recorded music, Alain Levy, industry observers say. But managing a merger without Mr Ames could be difficult.

Analysts also warned that any merger still needs to get past competition authorities, who have blocked past attempts. Music companies hope the regulators may be more lenient as the market comes under increased pressure, especially from internet downloading.

BMG, Bertelsmann and Sony Music declined to comment.