The world’s third largest music company, EMI, may have agreed to a 3.2 billion pounds (US$6.3 billion) cash takeover from private equity group Terra Firma. The offer of 265 pence for each share raised EMI’s stock 9.3% closing at 271 pence a share. Recent reports claim that EMI's board has given its backing to Terra Firma’s bid.

The British music company, made the headlines recently for their decision to allow DRM-Free song downloads over the iTunes store and Amazon’s upcoming digital music store. However, EMI wouldn't comment on what might happen to the DRM-free music if the company was bought.

The difficulties facing EMI were also laid bare on Monday as the group released its final results, showing pretax profit down more than 60 percent. Terra Firma said that including debt the deal put a value of 3.2 billion pounds on EMI, home to artists including Kylie Minogue and Norah Jones. The agreement also includes a break fee of 24 million pounds if EMI pulls out.

If accepted by shareholders, the deal would bring an end to the seven-year standoff between the world's third largest music company, EMI, and the number-four, New York-based Warner.

Despite having some of the biggest names in music like The Beach Boys, Pink Floyd, Janet Jackson, Robbie Williams, Depeche Mode, Iron Maiden, The Rolling Stones, Al Green, Moby and Queen, EMI has seen sales decline dramatically in recent months and said it had made a $512 million loss in the past year.

EMI previously rejected a takeover bid from rival Warner Music, but the battle for the music group may be far from over as investors are hoping that a bidding war may break out if Warner returns with a higher bid.