Bertelsmann Says EMI Would Fit With BMG Rights’ Music Acquisition Strategy
Bertelsmann AG Chief Financial Officer Thomas Rabe said EMI Group Ltd. would fit with the acquisition strategy of its BMG Rights Management, the music company that the German media company runs with KKR & Co.
EMI, based in London and owned by Citigroup Inc. (C), has said it is considering selling itself and is looking into a possible public offering of shares or a recapitalization. Initial bidders for the label of the Beatles and Pink Floyd included Warner Music Group Corp. (WMG), Sony Corp. and Vivendi SA (VIV)’s Universal Music, three people with knowledge of the matter said this month.
Asked whether Bertelsmann would consider joining with a third party to bid for EMI, Rabe told reporters today that the company has more flexibility in financing acquisitions because it is closely held. He declined to comment further on the EMI sales process, adding that Europe’s largest media company is as “prudent” as before and that its spending policy hasn’t changed amid the turmoil in capital markets.
Bertelsmann, based in Guetersloh, Germany, is looking for acquisitions after it returned to profit this year helped by rising advertising sales at broadcaster RTL Group. BMG Rights Management made bids for three different sets of assets from Warner Music, two people familiar with the talks said March 23. Warner Music this year agreed to be acquired by billionaire Len Blavatnik for almost $3 billion.
EMI Offers
Offers for EMI have come from parties interested in the whole company and in its individual businesses, one person said this month, declining to be identified because the negotiations are private. At least 10 proposals were submitted, said another person.
EMI has both production and publishing units that sign and promote singers and songwriters such as Coldplay, Snoop Dogg and Pink Floyd. Citigroup seized control of EMI in February after the company and its owner, Guy Hands’s Terra Firma Capital Partners Ltd., failed to meet the terms of loans used to buy the business, in a deal valuing EMI at about 3.2 billion pounds ($5.2 billion), according to data compiled by Bloomberg.
Bertelsmann currently has 1.6 billion euros of cash and unused credit lines, Rabe said today, adding that the company aims to cut debt in the second half of the year. Bertelsmann’s expansion plans come after several years when it had to focus on cutting debt because borrowing ballooned in 2006 through the buyback of a stake for 4.5 billion euros. The deal returned full control of the company to the Mohn family.
Acquisitions
Bertelsmann said in March that it could spend as much as 1 billion euros on acquisitions this year.
Bertelsmann Chief Executive Officer Hartmut Ostrowski said today that McGraw-Hill Cos.’s education business is “currently not in our focus,” adding that the company’s priority is to expand geographically.
McGraw-Hill, owner of Standard & Poor’s, is considering dividing in two, with the education publishing unit being spun off or sold, a person with knowledge of the plans said earlier this month.
Bertelsmann said today that net income rose 7.6 percent to 183 million euros in the first six months, driven by the RTL and book publisher Random House. Sales rose 1.9 percent to 7.2 billion euros.
To contact the reporter on this story: Ragnhild Kjetland in Frankfurt at rkjetland@bloomberg.net
To contact the editor responsible for this story: Simon Thiel in London at sthiel1@bloomberg.net
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