Blavatnik's Access wins Warner Music for $3.3 billion

The agreement values the world's third-largest music company's combined equity and debt at around $3.3 billion. The all-cash deal is expected to close in the third quarter.

The $8.25-a-share offer is a 63 percent premium to the price on Jan 21, when news broke that Warner Music's board had assigned advisers to explore its strategic options -- including a sale.

Warner Music, whose roster of artists include Bruno Mars, Green Day and Led Zeppelin, will become an autonomous unit of Access, alongside industrials assets in natural resources and chemicals as well as media and telecommunications.

Taking Warner Music away from the demands of being publicly traded is seen as an opportunity for Warner Music executives to take a bigger gamble on refocusing the company's traditional business model in the face of shrinking sales, rampant piracy and uncertain digital future.

It also raises speculation that Blavatnik could be interested in merging the company with smaller rival EMI Group to take advantage of a huge cost savings through combination. EMI is currently owned by Citigroup, which took control of the company after its former private equity owner Terra Firma defaulted on loans.

Blavatnik beat out last-round bids from Tom and Alec Gores' Platinum Equity/The Gores Group and Sony Corp in partnership with Guggenheim Partners and investor Ron Perelman. Other first and second round bidders included BMG Music Rights, a joint venture between Bertelsmann and KKR; and investor Ron Burkle's Yucaipa Co.

Blavatnik is a long-time associate of Warner Music Chief Executive Edgar Bronfman Jr and his father. He became a director of Warner Music in 2004, when Bronfman led a private equity buyout of the company from Time Warner Inc. Although Blavatnik stepped down from the board in 2008, he retained a 2 percent stake in Warner Music.

Bronfman and private equity firms Thomas H Lee Partners and Bain Capital Partners together hold around 56 percent of the company's outstanding shares and have entered into a voting agreement with Access to vote in favor of the merger.

Warner Music was bought in 2004 for $2.6 billion by an investor group led by Thomas H. Lee, Bain Capital, Providence Equity Partners and Bronfman. They took the company public the following year at $17 a share. Shares peaked in June 2006 at $29.48.

Access secured deal financing from Credit Suisse and UBS, who were also advisers on the deal. Warner Music was advised by Goldman Sachs and AGM Partners.

(Reporting by Yinka Adegoke and Megan Davies, editing by Gerald E. McCormick and Gunna Dickson)