Entertainment One, the parent company of Koch Entertainment, has signed a letter of intent to acquire Navarre Entertainment Media, the independent music distribution company owned by Navarre Corp., according to sources. The deal, which still has to go through the due diligence phase, is contingent on certain conditions being met, sources say.

If the acquisition is completed, Navarre will be merged into Koch Entertainment Distribution, giving the company a total annual revenue base of about $190 million, Billboard estimates. Koch has revenues of about $130 million, while Navarre's total net revenues were about $60 million in its most recent fiscal year, Billboard estimates.

That would make Koch the second largest independent distribution company, behind the Alternative Distribution Alliance, which is owned by the Warner Music Group.

In February, Entertainment One was acquired by Marwyn Investment Management LLP, a London-based private equity firm. At the time of the acquisition, Marwyn management said it intended to rapidly grow Entertainment One.

Meanwhile, Navarre, which began life as an independent music distributor, has diversified into a distributor of computer software and video games. Recently, founder Eric Paulson handed over the day-to-day reins of running Navarre to Cary Deacon, who doesn't have music industry experience.

While Deacon said he considered music one of Navarre's main support beams, others questioned if he would remain as committed to the music industry as Paulson did. Navarre, a publicly-traded company, will continue to operate as computer software and video game distribution business.

Navarre and Koch executives could not be reached for comment.