Sony has enterd in to a deal to buy out the half it doesn't own in the the world's second largest music group, Sony BMG music venture from German media giant Bertelsmann in a $1.2 billion deal. While the German group's 50 per cent stake will be obtained for $900 million, it will also receive another $300 million for its share of the cash on Sony BMG's books.

The company will be renamed Sony Music Entertainment Inc. and will become part of Sony's US unit, according to a joint statement released on Tuesday. Citigroup Inc. advised Sony on the transaction, and JPMorgan Chase & Co. worked with Bertelsmann. The transaction is subject to regulatory approval, the companies said.

Sony says its outlay is just $600 million because it had not consolidated Sony BMG onto its balance sheet. Bertelsmann, also the owner of publisher Random House and broadcaster RTL, also will take over a limited amount of European music catalog assets from Sony BMG that total about $20 million per year.

The divestiture is also in keepinng with media giant Bertelsmann's reorientation of the music business of its Bertelsmann Music Group (BMG) towards music rights management.

While divesting its stake in the  joint venture to Sony, Bertelsmann is taking over the rights to selected European catalogues of the works of more than 200 artists from Sony BMG, which will continue to be distributed by Sony Music.

The acquisition of theses catalogues is an important step for Bertelsmann's proposed licensing and management platform for devloping and marketing music rights in Europe under the BMG brand, which it regatrds as an attractive proposition.

"The activities of Bertelsmann's various divisions, coupled with the realignment of BMG, provide countless opportunities for us to put together attractive service packages for creatives and rights owners. Our top priority will be to assert the rights owners' claims efficiently and protect their interests against a backdrop of increasingly complex use and distribution models,'' says Hartwig Masuch, designated managing director of the music rughts management business.

Bertelsmann's chief financial officer Thomas Rabe, who is responsible for the music division on the group's executive board, ''The many new distribution paths are causing an increase in the demand for music use rights. We want to take advantage of our opportunities and position ourselves with the strong, well-established BMG brand and a management that is highly regarded in the market''.

For Sony, controlling Sony BMG will allow Sony, the world's second- largest maker of consumer electronics, to use artists' music in games for the PlayStation video-game console and in ads to promote Cyber-shot cameras and Bravia flat-panel TVs.

"This acquisition will allow us to achieve a deeper and more robust integration between the wide-ranging global assets of the music company and Sony's products, operating companies and affiliates," said Sony's chairman and CEO, Howard Stringer.

Bertelsmann, which created Sony BMG in 2004 to cut costs amid a drop in music sales, is leaving the 50:50 joint venture as new CEO Hartmut Ostrowski gets out of underperforming businesses to try to revive profit growth.

The four-year marriage had been on rocky footing ever since a European court ruled in 2006 that the European Commission erred in giving the venture antitrust approval in the first place.

Ostrowski, who started as CEO at the beginning of the year, said last month Bertelsmann will sell most of its book, CD and DVD clubs, where revenue has been declining, to focus on television, Internet and service businesses. The sales will cut ties with the business whose success helped Bertelsmann grow into Europe's largest media company since the last World War.

Sony BMG's sales dropped by 4 per cent to $4.1 billion in the 12 months through March as an increase in Internet revenue failed to make up for a decline in CD sales. Net income more than doubled to $178 million from $84 million as Sony BMG cut marketing and personnel costs.