BERLIN -- Sony was set Tuesday to take full control of the world's second largest recorded music company after German media giant Bertelsmann said it would quit their Sony BMG joint venture.

Just four years after Sony BMG was created with great fanfare, Bertelsmann said it was walking away after a "careful and thorough review" in a move "that we believe will benefit the stakeholders of both companies."

The German firm, which owns a string of media assets, will receive $1.2 billion (?776 million) from the deal, Sony said, including $300 million of its share of cash on Sony BMG's balance sheet.

Pending approval from competition regulators, the new company will be known as Sony Music Entertainment Inc (SMEI).

Sony BMG is one of the industry's "big four" together with Universal, EMI and Warner Music and has in its stable of artists the likes of Christina Aguilera, Celine Dion, Bob Dylan, The Foo Fighters and Bruce Springsteen.

The deal will enable Sony "to achieve a deeper and more robust integration between the wide-ranging global assets of the music company and Sony?s products, operating companies and affiliates," a joint statement said.

Bertelsmann said only that the move was "consistent with our new growth strategy and will enable us to focus on our defined growth areas."

It added: "Sony has been an excellent partner, and they are the right company to take this business to the next step and ensure that it realizes its full value and potential.

"We look forward to witnessing Sony Music Entertainment?s exciting future under Sony?s ownership."

Bertelsmann will take over some European music catalogue assets from Sony BMG, but these represent less than one percent of Sony BMG's yearly revenues.

The parties have also agreed to continue to share the company?s manufacturing and distribution requirements between Sony?s manufacturing subsidiary, Sony DADC, and Bertelsmann?s services company, Arvato.

The two firms joined forces in 2004 in a bid to save costs in the face of declining sales as more and more people either got hold of their music via Internet downloads or were not excited by new music.

Second only to Universal Music, Sony BMG accounts for around a quarter of global music sales, comprising labels including Arista Records, Columbia Records and Epic Records.

But Bertelsmann's decision to walk away makes clear that in the age of the Internet, making money from selling CDs is a tough business to be in and that simply joining forces in bigger and bigger companies may not be enough.

The announcement also comes only a few weeks after Europe's highest court told a lower EU court to take another look at the original 2004 merger after finding a first judgement in 2006 was riddled with errors.