Though financial details were not disclosed, a source familiar with the deal speaking on condition of anonymity because he was not allowed to talk to the press, says the deal is worth $1.5 billion (2.25 billion euros), including tax advantages.

Sony and Bertelsmann had each owned half of the New-York based Sony BMG, the world's second biggest music company since its creation in 2004. According to some press reports, Sony has maintained an option to buy Bertelsmann's stake.

"This move is consistent with our new growth strategy and will enable us to focus on our defined growth areas," Bertelsmann chairman Hartmut Ostrowski said in a statement about the deal.

Internet downloads lead to sale

German daily Frankfurter Allgemeine Zeitung reported in June that Ostrowski had decided to get out of the music business due to decreased sales caused by Internet downloads.

Bertelsmann remains active in other media areas, including the RTL television group, the publishers Gruner + Jahr and Random House, as well as book and record clubs. A partial sale of those clubs, which are currently being restructured, is expected to follow.

The new entity of Sony Music Entertainment Incorporated (SMEI) will encompass a string of music labels that include Arista Records, Columbia Records, Epic Records, J Records, Jive Records, RCA Records and Zomba.

Among its best-known artists are Celine Dion, Alicia Keys, Yo-Yo Ma, Bruce Springsteen, Justin Timberlake, Usher and Jay Chou.