EMI, the music and entertainment company whose acts include the Beatles and Coldplay, said yesterday it had agreed to a £2.4bn takeover by private equity group Terra Firma Capital Partners as the venture capital bid wave continued.

The cash offer of 265p per share was made by Maltby, a newly incorporated company set up by Terra Firma, the private equity firm run by City tycoon Guy Hands.

EMI's board described the offer as "fair and reasonable", adding that Terra Firma's bid was the best among several proposals it received.

The board agreed to pay Maltby a break fee of £24m if the deal collapses.

The Terra Firma bid caught the City by surprise and is the latest chapter in EMI's takeover saga, with rival Warner Music Group thought to be the favourite to buy the group after the label opened its books to potential suitors last week.

Earlier this year, EMI rejected a conditional proposal worth £2.1bn from Warner. New-York-based Warner made the approach after a profits warning from EMI.

Entertainment industry analysts said last night that Warner may raise its bid for EMI in a move to scupper the Terra Firma offer.

However, John Gildersleeve, the chairman of EMI, said: "Terra Firma's offer is the most attractive proposal received and delivers cash now, without regulatory uncertainty and with the minimum of operational risk to the company," he added.

EMI shares shot up by 23p, or 9.27%, to 271p after news of the offer raced through City dealing rooms.

Previous attempts by Warner and EMI to merge had stumbled on regulatory issues.

Warner Music, whose labels include artists such as Madonna and the Red Hot Chili Peppers, and EMI made two approaches for each other last summer as both struggled with falling sales amid the take-off in digital music downloads.

However, both groups were thwarted when a European court judgment cast doubt on whether regulators would allow further consolidation in the music industry.

Alongside the regulatory issues concerning a tie-up between Warner and EMI, digital rights protection was also seen as a potential barrier after EMI agreed to drop the copyright protection for songs sold on Apple's iTunes and other similar music retailers. Warner is against such a move and has criticised EMI's decision.

A sale to private equity would avoid many of these hurdles, although it is still subject to shareholder approval.

Hands said Terra Firma's aim was to "build on EMI's current position as one of the world's leading music companies and accelerate the development of its digital and online strategy".

EMI has been hit by the impact of digital downloading and a weak US market.

The group, which is home to stars including KT Tunstall, Lenny Kravitz, Lily Allen, Norah Jones and Robbie Williams, brought forward its full-year results by two days to coincide with the announcement it had reached a deal with Terra Firma.

EMI saw sales in its music division fall by 15% in the year to the end of March.

Total profits before tax and adjustments fell from £118.1m last year to a loss of £263.6m.

EMI is tackling the current sales crisis with a £110m restructuring programme, including savings from the removal of layers of management.

The firm said it has already carried out the majority of its cost-cutting rescue plan, with an estimated £70m of savings due to be achieved by the end of next March.

Hands, 47, built up Nomura Holdings' buy-out business in the 1990s before quitting to run his own firm with Nomura's backing in 2002. His other investments have included the German rest-stop chain Autobahn Tank & Rast.

The Terra Firma offer for EMI is the latest in a number of approaches made by private equity companies for listed firms.

One of the most notable involved CVC, which recently led a consortium that tried and failed to take over J Sainsbury, the supermarket group.

Alliance Boots has agreed an £11bn takeover bid from US venture capitalist Kohlberg Kravis Roberts, which featured in "The Barbarians at the Gate" book and film about the takeover of RJR Nabisco.