Chrysalis, the music business founded by Chris Wright, today rejected a £104 million takeover bid from Guy Hands' Terra Firma, the private-equity owner of EMI. The deal looks like the latest victim of the credit crunch.

Although neither side confirmed the identity of the bidder, Hands emerged as leading contender for what is now primarily a massive back catalogue of music during the auction, which started five months ago. His 155p-a-share bid was rejected as "significantly undervaluing" Chrysalis.

The group said it no longer believes "that the optimal conditions for extracting maximum value from its assets currently exist for shareholders". It said the credit crunch had knocked values and prevented some potential bidders from being able to take part in the auction. Music catalogues are traditionally attractive to private-equity firms, who can securitise their pretty-much-guaranteed income streams.

Analysts said the 155p offer had effectively placed a floor under Chrysalis' share price, with Wright still a potential seller at the right price. He transferred his 26% stake to his wife in a move that could have saved him up to £1.8 million in capital gains tax ahead of changes which came in this tax year. Wright also said he will take more of a back seat, becoming part-time executive chairman and leaving the day-to-day running of the business to chief executive Jeremy Lascelles.