The sale will help reduce the German media conglomerate's 4.5 billion euros debt, but is subject to regulatory approval.

BMG, whose roster of superstars includes Robbie Williams, Coldplay, Christina Aguilera, Barry Manilow and Justin Timberlake, owns the copyright to over one million pop and classical musical compositions, and earned 81 million euros on 371 million euros turnover last year before taxes.

Repayment of debt from sale

The sale of BMG allows Bertelsmann to repay a significant portion of the 4.5 billion euro debt to finance a its own repurchase.

"This transaction underscores our continued commitment to the de-leveraging strategy," said chief financial officer Thomas Rabe, who added that the Gütersloh-based conglomerate will remain fully committed to its recording business through its partnership with Sony Music Entertainment, Sony BMG Music Entertainment.

Bertelsmann also owns US publisher Random House and has a controlling stake in Europe's biggest magazine publisher Gruner + Jahr. Re-purchase of a stake from the proceeds of the sale, would restore full control of the company to the Mohn family, descendents of founder Carl Bertelsmann, publisher of hymn books back in 1835.

US and European regulatory approvals needed

The deal, which has been approved by both the supervisory boards of Bertelsmann and France's Vivendi, will make Universal the music industry's largest recording company and publisher with an estimated one-quarter share of the music publishing market. This would enable the combined group to leapfrog Britain's EMI Group, which until now has a leading share of the market.

The agreement which is to be signed Thursday is subject US and European regulatory controls. Impala, which is a leading group of independent labels in Europe has raised anti-trust concerns, and had originally protested the Sony-BMG merger in the recording sector. But both Bertelsmann and Universal are confident that the deal would be approved, since there is less consolidation in the music publishing business than the recording industry.

Napster litigation settled

Meanwhile Bertelsmann also made the announcement today that litigation related to its file sharing service Napster has been settled with Universal Music, a unit of Vivendi, which will receive $60 million. The Napster settlement ends three years of litigation against Bertelsmann, which was sued by various music publishers for copyright infringement.