updated 3/24/2006 5:17:30 PM ET 2006-03-24T22:17:30

Warner Music Group said Friday it reached a $67.5 million deal to acquire independent recording company Ryko Corp., which distributes music by artists such as The Posies, Big Star and Frank Zappa.

New York-based Warner Music is paying cash for Ryko, which was owned by a group of investors led by JPMorgan Partners.

The move will beef up Warner's music vault with some 1,000 recordings from Ryko's catalog of jazz, folk, rock, blues and other genres.

The value of catalog recordings has risen in recent years as record companies have found new sources of revenue from licensing music for use by wireless carriers, online music services and in television and film.

Ryko's collection of recordings includes works by independent music stalwarts such as They Might Be Giants, The Dead Milkmen, The Flaming Lips and The Replacements.

The recordings will be marketed under Warner's Rhino Entertainment label.

Ryko's flagship label, Rykodisc, will continue to run independently under the Warner umbrella, the company said.

Ryko Distribution, which handles releases for Rykodisc and several small independent music labels, will continue to operate separately of Warner's own independent label distribution operation, Alternative Distribution Alliance.

Warner sees Ryko and Alternative Distribution Alliance as complimentary operations, because Ryko has been successful at distributing output from labels selling far fewer units than the independent labels handled by Alternative Distribution Alliance.

Warner is not planning any layoffs as a result of the acquisition, which is expected to close in early June.

Ryko CEO Sam Holdsworth, who was brought in by JPMorgan, will be stepping down, but Jim Cuomo, president of Ryko Distribution, and William Hein, president of the Rykodisc label, will stay on.

Warner said it does not expect the Ryko acquisition to be material to its 2006 earnings.

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