EMI today set the music industry alight as it confirmed it had approached Warner Music with a $28.50 a share takeover offer that values its American rival at $4.2 billion - only to have its proposal rejected by its larger competitor.

Shares in EMI lost more than 3 per cent of their value as the group, which plays host to artists such as Coldplay, revealed preliminary details of the rejected cash and shares offer.

The confirmation represents the third time in five years the two sides have tried to cement a merger. The long-predicted merger, if eventually successful, would marry Coldplay with other artists such as Coldplay, Madonna, Eric Clapton and Eminem.

EMI was responding to recent media reports that senior executives had held preliminary talks.

The Sunday Times reported towards the end of last month that both sides were preparing for the talks, which could lead to the creation of the world's third-largest music company.

EMI said it "confirms that on May 1 it made an approach to Warner Music Group in connection with a proposed offer by EMI to acquire all of the outstanding shares of Warner Music for $28.50 per share, in a combination of cash and EMI shares".

"Subsequently, on May 2, Warner Music informed EMI that it did not wish to enter into discussions regarding EMI's proposal," EMI said.

The British company said it continued to believe a takeover would be "very attractive to both sets of shareholders" despite the rejection.

It made no mention of whether it would consider going hostile with its interest.

But it said it would only pursue a deal if it "enhanced value and earnings accretion to EMI shareholders".

In a short follow-on statement, Warner Music said simply that it had "recently received a preliminary non-binding proposal from EMI Group", adding: "The Warner Music Group board of directors has carefully evaluated the proposal in conjunction with the company's outside legal and financial advisers. The board has determined that the proposal is not in the best interests of our shareholders and has unanimously rejected it."

In the minutes following EMI's admission of the approach shares in music group slumped by more than 3 per cent, down 8.75p at 273.25p.

The share price values EMI at more than £2.23 billion.

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