Bertelsmann Moves to Avoid Public Offering of GBL Stake

24 May 2006

In a move that underscores its determination to remain a privately held family business, Europe's largest media company Bertelsmann is preparing to buy a 25% stake currently held by a minority investor.

Bertelsmann's controlling Mohn family, led by matriarch Liz, was shocked by the decision in January by Belgian financier Albert Frère and his investment vehicle Groupe Bruxelles Lambert to float their 25.1% stake [WAMN: 31-Jan-06].

Since when there has been much public speculation and even more private manoeuvring, culminating in Bertelsmann's announcement this week that it is prepared in principle to buy GBL's stake. All now hinges on whether the two sides can agree a price.

The family assesses the value of GBL's stake at up to €4 billion ($5.14bn; £2.73bn). Frère, on the other hand, is thinking north of €5bn, according to an insider reportedly 'close to the Mohns'.

Neither GBL nor clan Mohn is prepared to comment, although the voluble 'insider' reports that the family is opposed to over-leveraging the company as it would damage its investment-grade credit rating.

Among Bertelsmann's current assets are Europe's largest commercial TV broadcaster RTL Group, book publisher Random House, and Sony BMG Music Entertainment, a joint venture with Japan's Sony Corporation.

In a formal statement issued Monday, Bertelsmann confirmed it is prepared to buy out GBL if the two sides can agree "a reasonable price." It also bolstered its negotiating position by claiming it is prepared to see the 25% stake listed publicly if agreement can't be reached.

The Mohn family has repeatedly stated it has no intention of shedding any part of its 74.9% stake in Bertelsmann and it is unlikely they have ever enjoyed a sound night's sleep while a quarter of its fiefdom lies in other hands.

Data sourced from Wall Street Journal Online; additional content by WARC staff