Less than two weeks after announcing its world-shaking merger with America Online Inc., Time Warner Inc. has negotiated another mega-merger that would give the entertainment juggernaut control of British music giant EMI Group, home to the Beatles and Rolling Stones, sources said.

The deal, expected to be announced tomorrow in London, would merge Time Warner's music division with EMI to create the world's second-largest music conglomerate. The sources value the combined companies at $20 billion. The merger would instantly transform the landscape of the global record business by shrinking the number of major competitors from five to four.

The timing of the transaction, following Time Warner's Jan. 10 proposal to merge with Dulles-based AOL, also underscores the importance of music as the most immediately valuable entertainment asset on the Internet, where record companies hope to boost profits by delivering their products directly to computer users at home.

The proposed merger, closely guarded during months of negotiations, is likely to draw criticism from those who believe fewer competitors in the global music market will diminish diversity. But the deal also may accelerate online access to music for consumers around the world.

Time Warner, already the largest entertainment company in the world, has driven the vast consolidation of the entertainment industry over the last decade with its voracious dealmaking.

In music, the company's Atlantic, Elektra and Warner Bros. Records labels release CDs by such stars as Metallica, Jewel, R.E.M., Kid Rock and the Red Hot Chili Peppers. Adding EMI to its roster would give Time Warner access to artists on the Virgin, Priority and Capitol labels, including the Beastie Boys, Van Morrison, Massive Attack, Blur, Master P and Frank Sinatra.

Time Warner and EMI declined to comment, but sources said the deal was the brainchild of recently installed Warner Music Group Chairman Roger Ames, who has told executives at both companies that he intends to run the combined operation as a partnership with his longtime friend Ken Berry, the current head of EMI's music division.

Negotiations for the merger began in August, even before talks started between Time Warner and AOL, when Ames first approached Berry about the possibility of joining forces, sources said. Time Warner President Richard D. Parsons and Chairman Gerald M. Levin quickly threw their support behind Ames's plan for the merger. AOL executives, including chief executive Steve Case, were informed as the EMI discussions progressed and enthusiastically endorsed the possibility of gaining access to an even wider library of music for online exploitation, sources said.

Yesterday, Ames and Parsons flew from New York to EMI's London headquarters to hammer out the last-minute details of the pact with Berry and EMI Group Chairman Eric Nicoli, sources said. There is still a remote possibility the deal could unravel, sources said.

Analysts said that EMI would cost nearly $12 billion based on its current market value, including debt and a premium. Many prospective buyers considered that to be too steep of a price tag.

But by using its existing music assets, Time Warner has cut a deal to spend just slightly more than $1 billion to get control of EMI. And the merger would provide Warner EMI Group with millions of dollars in cost savings by allowing the combined company to integrate business operations and restructure the struggling Warner Bros. and Capitol labels, which have been performing poorly in recent years.

Under the agreement, Warner EMI Group would be a 50/50 partnership listed on the London Stock Exchange. The merger would require Time Warner to pay EMI a premium of a pound per share (more than $1 billion total) for the British company in exchange for control of the combined company's board of directors. Under the plan, the board for the combined company would consist of 11 members: six from Time Warner, including Parsons, and five from EMI, including Nicoli.

The proposed deal would have to be approved by government regulators and one area of the merger might be particularly troubling for antitrust authorities. Warner and EMI separately control the top music publishing companies and the combination would place more than three-quarters of that business in one company.

Warner EMI would emerge as a global powerhouse, selling one out of every four albums in the United States and accounting for more than 20 percent of all music sold around the world. The move would put Time Warner--which over the past decade has fallen from first to fourth place in domestic market share--back on the map in every territory around the world, nipping at the heels of Seagram Co., which became the industry leader in 1998 after acquiring PolyGram for $10.4 billion.

EMI, the crown jewel of the British media business, has been the on-and-off subject of takeover speculation for the past four years with a long list of potential suitors, including Seagram, News Corp., the Walt Disney Co. and Bertelsmann, which was reported to be still interested as late as last week.

The merger is expected to take about a year to complete.

Both the Warner and EMI music groups have struggled in recent years and now rank fourth and fifth in sales of music in the United States, the world's biggest market.

Though Warner's once was the dominant and most respected operation in the record business, its credibility has dwindled and its share of album sales in the U.S. music market has shrunk to 15.7 percent, from 22.4 percent in 1995, according to SoundScan. Warner's decline followed several years of turmoil that gutted the management team and shattered morale. EMI has experienced difficulty building its business in the United States and has gone through a series of management shake-ups.