Warner Music has walked away from making an offer for its rival EMI, giving Terra Firma, the UK private equity firm, a clear run at gaining shareholder acceptances for its £2.1 billion bid for the struggling British company.

Warner Music confirmed this morning that it would not make an offer for EMI, beating a July 19 "put up or shut up" deadline imposed by Britain's Takeover Panel.

Warner had been expected to counter Terra Firma's 265p-a-share bid, made in May, with a 300p-a-share offer for the group.

However, a bid by Warner would have been subject to regulatory approval by the European Commission, which could have taken up to 12 months to secure.

Terra Firma, founded by the City stalwart Guy Hands, must now win acceptances from EMI's shareholders.

So far the private equity firm has gained acceptances from only 5 per cent of EMI shareholders — falling short of the 90 per cent needed to clinch the deal — and has already extended the deadline once to tomorrow.

The private equity firm can extend the deadline again, to July 29, after which, if it has still not won enough support from EMI shareholders, it will have to approach the company's banks to ask them to lower the 90 per cent threshold of acceptances.

Terra Firma said this morning: "EMI shareholders who have not yet accepted the offer are urged to do so as soon as possible."

Shares in EMI dropped from 267p to 262.5p in early trading.

Slide show: Mercury Music Prize nominations 2007

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