The move would create the world�s largest record company, and put artists like Madonna, Metallica and REM under the same corporate roof as the Beastie Boys, Franks Sinatra and the Beatles.

The news comes just weeks after the Time Warner and Internet giant America Online shocked the media and business communities with word of their own $163 billion deal to merge, creating the largest media company in the world.

Details of the proposed deal are slated to be released Monday morning.

Analysts said with AOL, the merged EMI-Warner music division would have unprecedented access to the Internet for distribution and promotion.

�It gives EMI the flexibility to place content in front of individual buyers,� said Carlo Campomagnani, media analyst with Credit Suisse First Bosto. �In the old days, EMI was worth a function of cash generated from record selling. In the current environment its content can be used to do a lot more things and to attract Internet traffic.�

The new company would have Time Warner's Atlantic, Elektra and Warner Brothers records labels that include such performers as Metallica, Jewel, Madonna and REM.

EMI brings the Virgin, Priority and Capitol record labels, which includes the Beastie Boys, Van Morrison and Frank Sinatra.

EMI, one of the last major music companies unaligned with a larger media concern, has been the subject of merger speculation for some time. German media company Bertelsmann was reportedly interested in acquiring EMI, though neither company has confirmed.

Time Warner has been driving consolidation in the entertainment industry the past decade. The latest deal could quicken access to online music, an arena where record companies hope to increase profits by delivering products directly to consumers via the Internet.

Both companies declined comment on the deal, which has been a tightly kept secret during months of negotiations.

Unidentified sources told the Los Angeles Times that the proposed merger was conceived by new Warner Music Group Chairman Roger Ames.

Ames first approached longtime friend Ken Berry, the head of EMI's music division in August, well before merger talks between Time Warner and AOL, the newspaper said.

The deal quickly gained the favor of Time Warner President Richard Parsons and Chairman Gerald Levin. AOL Chief Executive Steve Case also endorsed the deal for its possibility to expand the music choices available to consumers online.

A new company called Warner EMI Music would be led by Ames, 50, as chief executive officer and Berry, 47, as chief operating officer.

The merger, which still needs the approval of regulators, is expected to take about a year.

— AP and Reuters contributed to this report