Shares of Warner Music Group fell after London-based EMI Group said it would no longer pursue a $4.6 billion merger with the U.S. recording giant.
EMI backed out of merger talks following a European court ruling earlier this month that scuttled two-year-old BMG Music Entertainment -- the joint venture between Sony Music Corp. and Bertelsmann AG.
Manhattan-based Warner Music issued a statement after EMI's announcement, saying it would also back out of its counteroffer for EMI.Shares of Warner Music fell as much as 11.3%, to $22.37, in morning trading and were down 3% intraday.
Warner Music and EMI have been locked in a tug of war since May, after each rejected a takeover bid from the other.
EMI and Warner Music previously attempted to combine in 2000, but were thwarted by regulators. Three years later, a group led by Edgar Bronfman Jr. purchased Warner Music for $2.6 billion and took the company public.
A Warner-EMI merger would have controlled 25% of global sales, making it the second largest music group behind Universal Music Group, a unit of Paris-based Vivendi.
EMI's roster of current talent includes British rock band Coldplay, Janet Jackson, The Rolling Stones and hip hop producer and rapper Pharrell Williams. Warner Music's roster includes Phil Collins, Madonna, reggae star Sean Paul and Bad Boy music label founded by Sean "P. Diddy" Combs.
Warner Music said it would "monitor the situation carefully," but until matters cleared up through a re-review of Sony-BMG by the European Commission or a court appeal to the European Court of Justice, Warner officials said "it would not be prudent" to pursue a deal with EMI.
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