Bertelsmann Ends Gruner & Jahr Talks, Fuels RTL Speculation

Bertelsmann SE, Europe’s biggest media company, ended talks with the Jahr family for a complete takeover of publishing house Gruner & Jahr AG, fueling speculation over a buyout of broadcasting unit RTL Group SA. (RTL)

The shareholder structure of Gruner & Jahr, which is 25.1 percent owned by the Jahr family, will remain unchanged, Bertelsmann said in a statement today. After “intensive and constructive talks,” both sides agreed that “the challenges ahead for G&J can best be mastered together,” Jahr Holding GmbH Managing Director Winfried Steeger said in the statement.

RTL, which is 92.3 percent controlled by the Guetersloh, Germany-based company, rose as much as 3.8 percent in Brussels to the highest level since April 3. Bertelsmann Chief Executive Officer Thomas Rabe may work on a buyout offer for minority shareholders as a revised Luxembourg takeover law this month removed the legal risks for a deal.

“Bertelsmann not buying the remaining stake in Gruner & Jahr means that Rabe has more cash available,” said Kris Kippers, an analyst at Petercam SA in Brussels. “RTL’s rising share price could imply that the market is speculating again that Bertelsmann may take full control of RTL.”

RTL added 3 percent to 77.50 euros at 4:44 p.m. in Brussels, valuing the stake that Bertelsmann doesn’t already own at 833 million euros ($1.1 billion).

Options Open

“We are keeping all options open regarding our stake in RTL,” Christian Steinhof, a spokesman for Bertelsmann, said today.

Rabe, who took over in January, said Bertelsmann needs to raise debt and equity for “major” acquisitions to reduce its dependence on Europe, expand digital businesses and boost growth.

Gruner & Jahr, whose publications include weekly magazine Stern and the Financial Times Deutschland, is struggling to maintain profitability for consumer magazines in Germany and other European countries as the region’s debt crisis weighs on companies’ spending and advertisements migrate to the Internet.

With first-half revenue little changed at 1.1 billion euros, Gruner & Jahr’s operating profit fell 31 percent to 85 million euros from a year earlier, Bertelsmann said last month.

Random House

Consumer publishers are usually valued at about seven times earnings before interest, tax, depreciation and amortization, according to Alex DeGroote, a media analyst at Panmure Gordon & Co. (PMR) in London. That multiple would give Gruner & Jahr a value of about 1.74 billion euros, based on based 2011 earnings.

A 100 percent stake in Gruner & Jahr would facilitate cooperation between the publisher, RTL and Random House, Rabe said in an interview with the Frankfurter Allgemeine Zeitung on Sept. 13.

Luxembourg’s revised takeover rules this month clarified the procedures for determining the price at which owners of more than 95 percent of a publicly traded company can force remaining shareholders to sell their stock.

A buyout of minority investors would give Bertelsmann complete control over RTL’s 1 billion euros in annual cash flow to finance growth.

To contact the reporter on this story: Joseph de Weck in Berlin at jdeweck@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net