Bertelsmann SE, Europe’s biggest media company, is looking to snap up assets from EMI’s music business that may be offered for sale to placate regulators.
“Acquistions will play a role, next to organic growth, in the implementation of our growth strategy,” Thomas Rabe, who took over as Bertelsmann’s chief executive officer in January, told reporters on a conference call today. “We are also looking at the opportunities resulting from the takeover of EMI’s publishing business by Sony and the recorded media business by Universal Music.”
Universal Music offered to sell rights to some EMI labels to eliminate regulators’ concerns as the 1.2 billion-pound ($1.9 billion) acquisition of EMI’s recorded music business is pending approval by national and European Union watchdogs, people familiar with the matter said this week.
Rabe, Bertelsmann’s former chief financial officer, aims to boost growth by expanding the BMG music-rights unit, establishing the Guetersloh, Germany-based company in the education-services market and pushing its presence in China and India. Bertelsmann changed its legal form from a stock corporation to a partnership with limited shares this month, allowing the company to tap financial markets to boost growth.
The Mohn family, which resisted taking Bertelsmann public in the past decade, initiated the change, Rabe said earlier this year.
Bertelsmann will use equity and borrowed capital to finance growth, though no talks on raising equity capital have taken place with investors, Rabe said today. The company issued 10- year bonds worth 750 million euros on July 26.
Bertelsmann today said first-half operating profit fell 1.1 percent on declining advertising revenue at the RTL broadcasting division and Gruner & Jahr magazine unit. Sales from continuing operations rose 5 percent to 7.57 billion euros.
“Subdued economic prospects and the euro crisis, whose repercussions are challenging to gauge, make it difficult to predict future developments,” Rabe said.
Since Rabe was promoted, Bertelsmann has set up a wider management committee to advise the board on strategy, hired an executive to supervise expansion in new areas, and appointed two new CEOs for the RTL division.
Citigroup agreed in November to sell EMI’s recorded music and publishing business in separate transactions for a combined $4.1 billion. Universal Music agreed to buy EMI’s recorded division while a Sony Corp.-led group agreed $2.2 billion for publishing. Citigroup seized EMI from Guy Hands’s private equity firm, Terra Firma Partners Limited, in February 2011 after it failed to meet loan terms. Hands bought EMI for 4 billion pounds in 2007.
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