Germany's Bertelsmann today it plans to merge its BMG music business with that of Japan's Sony in a 50-50 joint venture.
"The deal is based on a 50-50 valuation of the two assets, and there will be no cash payment," Bertelsmann chief executive Mr Gunter Thielen said in a phone interview.
"We have combined our assets with Sony's because we believe music will remain one of our core businesses."
Mr Thielen said Bertelsmann and Sony had so far signed a non-binding letter of intent, but that he was confident that a final agreement could be made within several weeks.
"We don't expect any surprises," Mr Thielen said. "However, you can never rule them out entirely," he added.
The new company would combine the second and fifth-largest record labels, and its market share would rival market leader Universal Music's 25.9 per cent share of global music sales.