Bertelsmann Plans to Spend $3.9 Billion on Deals Over 3 Years

Bertelsmann SE, Europe’s largest media company, said it plans to spend as much as 3 billion euros ($3.9 billion) on acquisitions over the next three years as it seeks to grow and limit its reliance on Europe.

The planned sale of a 17.3 percent stake in broadcaster RTL Group SA plus about an annual 500 million euros of net cash flow will fill Bertelsmann’s war chest, Chief Executive Officer Thomas Rabe told reporters in Berlin today. The company will focus on individual deals worth “a couple hundred millions of euros” rather than a single big acquisition that “wouldn’t fit Bertelsmann’s risk profile,” he said.

Rabe, who took office at the beginning of last year, is overhauling Guetersloh, Germany-based Bertelsmann’s portfolio with a push into music rights, education and emerging markets. The company, which benefited from the best-selling book “Fifty Shades of Grey” last year, still relies in Europe for 80 percent of sales.

“It is our clear objective to grow the company in the next couple of years,” the CEO said. “Assuming a little bit of tailwind from a recovery in Europe, we expect to grow to 17 billion euros this year and 18 billion euros in the next.”

Bertelsmann’s sales grew 4.5 percent to 16.1 billion euros last year, Rabe said. The forecast doesn’t include any potential acquisitions. Operating earnings before interest and taxes from continuing operations will remain at more than 10 percent of revenue in coming years even as the company spends to introduce new digital products and reorganizes some of its legacy businesses such as printing.

Penguin Merger

Rabe said Bertelsmann won’t bid for Springer Science & Business Media, a German academic publisher owned by EQT Partners AB, because it’s “too big.”

The company’s 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. This year, Bertelsmann agreed to acquire full ownership of BMG Rights by buying a 51 percent stake from its partner KKR & Co.

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.

An initial public offering of Bertelsmann is “off the table for the foreseeable future,” Rabe said, adding that the company will focus on raising funds at a unit level.

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