Bertelsmann Plans to Cut $2.7 Billion RTL Stake to Fund M&A

Bertelsmann SE plans to sell a 2 billion-euro ($2.7 billion) stake in broadcasting division RTL Group SA as Europe’s largest media company looks for takeover targets to accelerate growth.

Bertelsmann intends to lower its stake in Luxembourg-based RTL to about 75 percent from 92.3 percent, it said yesterday. A sale would free funds for a larger acquisition, with potential targets including Deutsche Telekom AG’s online classifieds business Scout24 Holding GmbH as well as Springer Science & Business Media, the German academic publisher owned by EQT Partners AB, according to a person familiar with the matter who asked not to be identified because the discussions are private.

RTL fell 10 percent to 67.98 euros at 9:14 a.m. in Brussels, the biggest intraday drop in 1 1/2 years. Chief Executive Officer Thomas Rabe is looking for acquisitions to reduce Bertelsmann’s dependence on Europe. Based in Guetersloh, Germany, the media group’s assets range from magazine publisher Gruner + Jahr to outsourcing division Arvato. Its Random House publishing unit agreed in October to merge with Pearson Plc’s Penguin division to create by far the largest book publisher in the U.K. and the U.S.

“The sale of RTL Group shares would be one element in financing the long-term corporate strategy,” Rabe said in a statement. “The goal is to make Bertelsmann a faster growing, more digital and more international company in the years ahead.”

Special Dividend

Based on yesterday’s close, before Bertelsmann announced the disposal plan, RTL had a market value of 11.7 billion euros, with the stake it intends to cut valued at about 2 billion euros.

RTL, Europe’s largest broadcaster, said the timing will depend on a “favorable” market environment. No decision has been made on whether the shares will be sold on the open market or to a strategic investor, according to the person.

The broadcaster said it will consider a special dividend as it looks for ways to make its capital structure more efficient. Bertelsmann’s biggest unit by revenue, RTL generated about 60 percent of the group’s earnings before interest and taxes in 2011.

Bertelsmann has expressed interest in Springer Science & Business Media, people familiar with the talks said in November. EQT, the private-equity firm that bought the company in 2009, had been seeking offers of as much as 4 billion euros, people familiar with the talks have said.

Music Rights

Rabe also said last year that he wants to expand the BMG music-rights unit and may acquire assets that Universal Music is spinning off as a result of its EMI purchase. It could also seek full control of BMG should its partner KKR & Co. decide to sell its stake.

Deutsche Telekom, Germany’s former phone monopoly, is evaluating a sale of Scout24 as an alternative to an initial public offering of the unit, people familiar with the plans said last month. The business, which includes real-estate and automobile classifieds websites, could fetch about 1.5 billion euros, and has also attracted the interest of Axel Springer AG.

Revenue Rises

A sale of an RTL stake for another takeover would mark a return to dealmaking by Rabe a year into his role as Bertelsmann’s CEO. In 2006, as chief financial officer, Rabe orchestrated the 4.5 billion-euros purchase of a 25 percent Bertelsmann stake from Groupe Bruxelles Lambert SA.

The Mohn family owns 19.1 percent of Bertelsmann, which was founded in 1835 by Carl Bertelsmann. The rest is held by foundations including the Bertelsmann Foundation and the Reinhard Mohn Foundation, whose boards count some Mohn family members.

Bertelsmann said yesterday its 2012 revenue jumped about 4 percent to 16 billion euros, while earnings before interest and taxes matched the previous year’s 1.7 billion euros. Net debt fell to 1.2 billion euros from 1.8 billion euros a year earlier.

Still, Europe’s debt crisis has put greater pressure on the company’s print businesses and operations in southern Europe.

Bertelsmann had previously said it would be open to taking full control of RTL. In October, Luxembourg put a law into effect that clarified rules for owners of more than 95 percent of a publicly traded firm, such as RTL, to force minority shareholders to sell their stakes, eliminating legal concerns about a full takeover.

“We have always stressed that we could imagine a change in ownership interest in either direction, so our plan, if we were to execute it, is in line with our previous position,” Rabe said yesterday.

Before it's here, it's on the Bloomberg Terminal.