NEW YORK (CNN/Money) - Time Warner Inc. agreed to sell its music business Monday for $2.6 billion in cash to investors led by Edgar Bronfman Jr., whose bid to get back into the music business also will give him a chance to rebuild his family's wealth.

CNNfn's Allan Chernoff reports on Time Warner's pact to sell its music unit to investors led by Thomas H. Lee Partners and Edgar Bronfman Jr. for $2.6B. Play video (Real or Windows Media)

The media conglomerate, which has been selling what it considers non-core assets as a way to cut debt, retained rights to repurchase a minority stake in the operation on what was referred to as favorable terms in the future. The operation will retain the name Warner Music.

When it closes in January, the deal will allow Time Warner to meet its goal of cutting its debt to under $20 billion a year ahead of schedule, Time Warner Chairman Dick Parsons told CNNfn. That would be nearly a year ahead of Time Warner's schedule for debt reduction.

"We're now in a position to do the things that I didn't think we'd be able to do till the 2005 time frame," Parsons said in an interview.

QUICK VOTE   Have you tried one of the new, fee-based music downloading services?   Yes   No    View results

He said Time Warner intends to explore possible acquisitions of television programming libraries and cable operating systems.

"We like the cable business," Parsons said. "We think that's a business that's going to be a consolidating business over the next couple of years and we'd like to be in a position to play in that consolidation. And I think this puts us right in the midst of it as we speak."

Investors liked the deal as well, and Time Warner (TWX: up $0.32 to $15.87, Research, Estimates) stock gained about 2 percent in New York Stock Exchange trading.

Bronfman will be the most-senior executive of the new company. The former CEO of Seagram Co. Ltd. from 1995 to 2000, he acquired Universal Music and Universal Studios during that time, and took Universal Music to the largest in the industry.

"Warner Music Group is one of the world's greatest recorded music and music publishing companies, and we have great faith in its potential for growth as an independent company and in the long-term opportunities of this industry," Bronfman said.

Warner Music's artists include Madonna.

But Bronfman has also had his problems in the entertainment industry.

He agreed to sell Seagram to Vivendi in June 2000, creating Vivendi Universal, taking mostly stock in the $34 billion deal and putting much of his family's holdings into the stock of the former French water utility. But investors quickly soured on the deal, driving Vivendi shares sharply lower, and the French conglomerate was eventually forced to sell many of its entertainment assets.

Bronfman made a run at some of those entertainment assets, including Universal Studios, earlier this year using basically the same group of financial backers. But he was outbid by General Electric Co. (GE: Research, Estimates), which is planning to combine Universal Studios with its NBC television networks group.

Warner Music's labels include Atlantic, Elektra, Reprise, and Warner Bros. Records, and its artists include Madonna, Faith Hill, Red Hot Chili Peppers and Green Day.

It also has a back catalog that includes legends such as Led Zeppelin, Jimi Hendrix, the Eagles, Ray Charles, Aretha Franklin and Frank Sinatra.

It is the No. 4 record company, with about 11.9 percent of the market.

But the industry has been troubled, with free music downloads cutting into revenue. No. 1 record company Universal Music cut the prices of its compact discs earlier this year in an attempt to win back consumers who had been lost to free music downloads.

Time Warner reported that the unit lost $1 million in the third quarter, and $9 million year to date, on basically flat revenue in the first three quarters. Earlier this year, the Time Warner Chief Financial Officer Wayne Pace referred to music as the company's "most structurally challenged business."

Time Warner, owner of CNN/Money, earlier held talks with Bertelsmann's recording company BMG Entertainment and more recently with EMI PLC, the British recording company that is No. 3 behind Universal and Sony and is the largest label not associated with a major media company. But EMI announced earlier Monday that it had dropped out of the bidding.

YOUR E-MAIL ALERTS Time Warner Music Media or Create your own Manage alerts | What is this?

EMI was reportedly interested in just the recording company, not the music publishing unit included in Bronfman's purchase.

Antitrust regulators had blocked earlier possible music merger deals between EMI and Warner Music as well as between EMI and BMG, although with the troubles in the music industry, regulatory concerns were expected to be less of a hurdle this time.

Still, by going with the Bronfman group bid, Time Warner probably speeds up the time needed to complete the sale. The deal is expected to close within 60 days, the companies said.  

Reuters contributed to this story