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updated 3/8/2005 4:23:08 PM ET 2005-03-08T21:23:08

Warner Music, the world's fourth-largest recording group, is pressing ahead with plans for an initial public offering only 11 months after it was acquired for $2.6 billion by a group of private equity firms.

The former division of Time Warner, now run by Edgar Bronfman, is expected to file documents for a stock market listing with U.S. regulators this week, according to people familiar with the matter.

Investment bankers at Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Deutsche Bank have been selected to underwrite the offering, they added.

Warner Music is believed to be seeking to raise about $1 billion from an IPO, although that number could change ahead of the filing, insiders warned.

An IPO in the next few months would offer further evidence of the extraordinary turnround in Warner Music's fortunes since it was bought by Bronfman's group for $2.6 billion in April last year.

A public offering was first mooted last September after cost savings at the music company proved to be much higher than anticipated. The group returned to profit last August, with annualized savings of $225 million achieved after more than 1,000 jobs were cut.

U.S. music sales recovered last year for the first time in four years on the back of strong sales of digital music. This gave a much needed boost for the sector amid continued CD piracy and illegal internet file-sharing, which has dented sales and profits at the largest labels.

Industry setback
However, sentiment suffered a setback in February after a profit-warning from EMI, the world's third-largest music group.

As the only independently listed "major," EMI's financial results often set the tone for shareholder sentiment towards Universal Music part of Vivendi Universal the newly merged Sony BMG and Warner Music.

Part of EMI's troubles were related to delays to the release of new albums from two of its biggest selling bands: Coldplay and Gorillaz.

"There remains a question about the long-term business model that will work for the music industry," said a senior industry executive. "Companies may do well in the next two or three years but what happens after that? They are still very dependent on developing pipelines of new talent."

The listing should be a massive boon to Thomas H Lee Partners, Providence Equity Partners and Bain Capital, the three private equity groups that snatched the deal to acquire Warner Music in a bidding war with EMI, the UK music group, in late 2003. Time Warner will also receive a pay-out if the IPO goes ahead.

© The Financial Times Ltd 2013. "FT" and "Financial Times" are trademarks of the Financial Times.

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