All hell has broken loose in the music business: The Warner Music Group will be shopped while it prepares to buy EMI, should that company come up for sale, according to reports.

Sources told The New York Times that the private equity firms that own about 70% of the publicly traded WMG have hired Goldman Sachs to shop the company. That development was prompted by the BMG/Kohlberg Kravis Roberts & Company joint venture approaching WMG to see if it was up for sale. Previously, WMG was waiting to see whether Citigroup would gain control of EMI from Terra Firma and would subsequently put it up for sale.

But when KKR came knocking, the private equity firms controlling WMG -- Thomas H. Lee, Bain Capital and Providence Equity Partners -- decided to explore all of their options. So far, Goldman Sachs has put together a book on WMG and has reached out to potential suitors to assess interest. But before such books are distributed, non-disclosure agreements need to be signed, and reportedly Goldman Sachs is at that stage, negotiating the wording of the agreements with potential suitors.

In addition to private equity firms and BMG, books will likely be spread to Universal Music Group, Sony Music Entertainment, Imagem, and maybe even Citigroup, sources close to the situation told Billboard.

"Its crazy," said one music industry executive. "We could wake up in April and find both EMI and WMG up for sale!"

It's also possible that the Warner Music Group could be split up and its publishing sold off separately; that's where most of the interest lies in the financial sector. That scenario also could hold true for EMI, although EMI insiders said that Citigroup believes it can get the most value by selling that company as a whole.

"The WMG private equity owners will go whichever way creates the most value," said one source familiar with the situation. "They may sell all of it or part of it; anything could happen, nothing could happen. They may try to buy all of EMI or part of EMI."

But another source said, "It stretches credulity for them to be [both] a potential buyer and seller. It's more likely they are selling."

Yet the dynamics of the situation surrounding both majors leaves open a plethora of possibilities and "in all these scenarios, more than likely KKR/BMG could be the ultimate winner," said a Wall Street analyst familiar with the music industry.

A Warner play for EMI would mean that it probably would have to unload one of the publishing companies or face insurmountable regulatory issues.

That would be a plus for BMG.

As it is, BMG may soon have the option of cherry-picking either Warner/Chappell or EMI Music Publishing, and with two publishing companies on the market, that could hurt valuations, said one source.

By placing WMG on the block before EMI is ready for sale, the WMG private equity owners are pre-empting Citigroup and stealing away the attention of potential EMI suitors, said another Wall Street source.

WMG's stock rose 27.3% on the news that the company might be up for sale, closing at $6.01, up 27.3% from the previous day's close of $4.72. But in addition to increasing the value of the company's stock, the price increase also may help its ability to borrow, should WMG turn out to be a buyer.

"A higher stock price insures that it will be able to borrow at better rates," said the Wall Street analyst.

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