Billionaire Len Blavatnik's Access Industries has won the auction to take control of Warner Music Group Corp for $3.3 billion, setting the stage for a possible bid for rival music company EMI Group.

The agreement values the world's third-largest music company's combined equity and debt at $8.25 a share, the companies said on Friday. The all-cash deal is expected to close in the third quarter.

Blavatnik, who is best known for his investments in natural resources and chemicals, has agreed to pay a 63 percent premium to the price when news broke that Warner Music's board had assigned advisers to explore its strategic options -- including a sale.

A long-time associate of Warner Music Chief Executive Edgar Bronfman Jr and his father, Blavatnik is likely to keep Warner Music's management in place and turn to the team to lead a run for EMI, home of current acts like Lady Antebellum and Coldplay as well as marquee names that include the Beatles.

EMI is currently owned by Citigroup, which took control of the company after its former private equity owner Terra Firma defaulted on loans. If Blavatnik makes a successful bid for EMI, he could be rewarded with cost savings in the hundreds of millions of dollars by combining the companies.

Warner Music, whose roster of artists include Bruno Mars, Green Day, Red Hot Chili Peppers and Led Zeppelin, will become an autonomous unit of Access. It will sit alongside industrials assets in natural resources and chemicals as well as media and telecommunications.

Blavatnik became a director at Warner Music in 2004, when Bronfman led a private equity buyout of the company from Time Warner Inc. Although Blavatnik stepped down from the board in 2008, he retained a 2 percent stake in Warner Music.

Bronfman and private equity firms Thomas H Lee Partners and Bain Capital Partners together hold around 56 percent of the company's outstanding shares and have entered into a voting agreement with Access to vote in favor of the merger.

Thomas H Lee Partners will make a return of about two times its original $655 million investment on sale of Warner Music Group to Access Industries, a source familiar with the investment said on Friday.

Boston-based THL Partners was the largest private equity investor in the $2.6 billion buyout of Warner Music in 2004.

The $655 million includes money from co-investors -- limited partners which invested alongside THL.

The investment reaped THL and its co-investors about $775 million in a series of dividends paid during the life of the investment, the bulk of which were paid in the first year, the source said. THL and co-investors' stake of about 56 million shares in Warner is worth about $460 million at Friday's offer price of $8.25.

Taking Warner Music away from the demands of being publicly traded is seen as an opportunity for Warner Music executives to take a bigger gamble on refocusing the company's traditional business model in the face of shrinking sales, rampant piracy and an uncertain digital future.

Blavatnik beat out last-round bids from Tom and Alec Gores' Platinum Equity/The Gores Group and Sony Corp in partnership with Guggenheim Partners and investor Ron Perelman. Other first and second round bidders included BMG Music Rights, a joint venture between Bertelsmann and KKR; and investor Ron Burkle's Yucaipa Co.

Access secured deal financing from Credit Suisse and UBS, who were also advisers on the deal. Warner Music was advised by Goldman Sachs and AGM Partners.

(Reporting by Yinka Adegoke and Megan Davies, editing by Gerald E. McCormick and Gunna Dickson)