Music giant EMI and US rival Warner Music were yesterday locked in a takeover tug-ofwar as both companies battled to take control of each other.
EMI - home to Coldplay, Gorillaz and Robbie Williams - said it had rejected a 320pa-share offer from Warner which valued the company at £2.54 billion.
The Warner bid came in response to a £2.52 billion offer from London-based EMI, which the US firm rejected on Wednesday night as the two companies traded blows with a series of takeover proposals.
The frenzied bidding activity yesterday sent shares in EMI nine per cent higher.
A tie-up between the two music giants has long been regarded as a strong possibility as the pair have circled each other for years, with agreements almost reached in 2000, 2001 and 2003.
The combined music company would be the third largest in the world behind Universal Music and Sony, and would bring together EMI's stable of artists with the likes of Madonna from the Warner camp.
The latest takeover battle began in May when EMI launched a £2.31 billion bid for Warner, which was immediately rejected.
A month later, on June 14, Warner made an alternative bid for EMI worth £2.5 billion, but EMI said it was too low and it was unanimously rejected by the board.
On June 23 EMI went back to Warner with an improved £2.52 billion offer, which valued its shares at $31 (about £17) each. This bid was rejected by Warner on Wednesday night, triggering the US firm's improved £2.54 billion offer for EMI.
Yesterday EMI said: "The board of EMI has unanimously rejected the revised alternative proposal from Warner Music at 320p a share and considers it to be wholly unacceptable.
"The board of EMI continues to believe that an acquisition of Warner by EMI at $31 a share in cash would be very attractive to both sets of shareholders and would deliver value to EMI's share-holders which is far superior to Warner Music's revised alternative proposal."
Financial advisers for both companies were still engaged in discussions, people close to the situation said, though it remained unclear whether either company was in position to raise its offer again.
"I think it will die down," said one person close to EMI, who requested anonymity.
"There's nothing more to come from us," the source added.
Analysts ultimately believe a deal will be struck between the two companies because of the inherent logic of a combination, but exactly when remains up in the air.
They estimate a merger would produce several hundred million pounds of cost savings.
However, the timing of the negotiations is also complicated by Bertelsmann current sale of BMG Music Publishing, which owns the copyrights to thousands of songs. The firm is said to be worth at least 1.5 billion euros (£1.04 billion) and both Warner and EMI are among the suitors.
The developments are the latest in a years-long quest to put the companies together, which would create a rival on par with music majors Universal Music, owned by French conglomerate Vivendi, and Sony BMG, a joint venture between Sony Corporation and Bertelsmann.
Richard Hunter, of Hargreaves Lansdown Stockbrokers, said the benefits of a combination were clear to both EMI and Warner and could result in hundreds of millions of pounds in cost savings.
It will also give both firms increased exposure in the rapidly expanding digital music market on both sides of the Atlantic.
"The underlying benefits of a tie-up are obvious to both of them," said Mr Hunter.
"But what they cannot agree on is whether A should take over B, B should takeover A, or a merger of equals."
He added that the market was not convinced that a deal would be struck this time round.
"It is odd that the EMI share price has held around 309p to 310p, given that the offer price is 320p, and it says something about the market reaction to the news.
"This is becoming one of the longest takeover pursuits in history and the market is not convinced that it is going to happen this time either.
"Whether it will convince EMI to make another offer for Warner is the next interesting development to this story."
Shares closed up 233/4p at 3071/2p.