Bertelsmann Begins the Post-Mortem

31 July 2002

Following the weekend’s dramatic ousting of chief executive Thomas Middelhoff [WAMN: 29-Jul-02], privately-owned German media mammoth Bertelsmann has begun the inevitable post-mortem.

An equally dramatic fall in profitability – the group’s Random House, BMG and DirectGroup [book club division] have all fallen into the red over the past year – has prompted new chairman/chief executive Gunter Thielen to order an a exhaustive review of all activities .

Word from within the media conglomerate is that its US operations in particular will be under the microscope with a view to possible disposal – among them internet music service Napster and the stateside unit of magazine publisher Gruner + Jahr. “[Thielen] is going to look at every business that is not profitable, and will make some tough decisions,” says a Bertelsmann mole.

But the company insists it is not facing a liquidity crisis despite the fact that it last week postponed a massive bond issue valued between €750 million ($737.66m; £469.31m) and €1 billion, attributing this to “weak market conditions”. Also looming is a payment thought to be in the region of $3bn for control of US music business Zomba.

Meantime, chief operating officer and Middelhoff lieutenant Ewald Walgenbach (43) is said to be nervously looking over his shoulder and updating his resumé. His former boss, the while, is inspecting suitable bank vaults for accommodation of his severance package, expected to be one of the most munificent in the history of German business.

Data sourced from: Financial Times; additional content by WARC staff