Bertelsmann to Acquire Full Control of BMG
UPDATED: The German media giant will buy out private-equity firm Kohlberg Kravis Roberts, which has been its partner in the music rights management firm.
German media giant Bertelsmann said Friday that it is acquiring full ownership of music rights management company BMG by buying out the stake of private-equity partner Kohlberg Kravis Roberts & Co.
The deal, financial terms of which weren't disclosed, will make BMG a wholly owned subsidiary of Bertelsmann. Bloomberg News reported that the German media company would pay an amount in the low- to mid-three-digit million euros range and also take on some BMG debt.
A few years ago, the firm had decided to exit the traditional music business when it sold its recorded music business to Sony Corp. in 2008. It then decided to run the BMG music rights business with KKR, which held a 51 percent stake, as a financial partner. The company made a slew of acquisitions in the U.S. and U.K. as well as Germany and France.
But the buyout will allow Bertelsmann to return to the music business full time and fits into its focus on growth businesses and development of revenue streams outside print media and Europe, CEO Thomas Rabe said.
BMG administers the rights to more than 1 million songs, including works from Bruno Mars, Duran Duran, Johnny Cash and will.i.am. It also represents the composition and recording master rights for the likes of Brian Ferry, Nena and Anastacia.
“This is a great day for Bertelsmann: We are bringing the music home to our group," Rabe said. "A few years after our exit from the traditional music business, in association with KKR, we have succeeded in building the world's fourth-largest music rights management business. Our partnership made it possible for BMG to take advantage of consolidation opportunities and to rapidly advance the organic expansion of the business."
He added: "Taking full ownership of BMG is an important step in putting Bertelsmann’s growth strategy into practice. We are happy to have BMG as our own company again."
Bertelsmann also said that BMG, which is headquartered in Berlin and has a presence in eight core countries, is highly profitable. It didn't disclose details. But Rabe told Bloomberg that his team is targeting BMG revenue growth to $655 million (€500 million) in the next four to five years, compared with about $390 million (€300 million) in 2012.
The deal, which is subject to regulatory approval, is scheduled to close during the first half of the year.
Said BMG CEO Hartwig Masuch: “For BMG, this is a return home. Being a subsidiary of one of the world's leading media companies opens up more fields of cooperation for us and our customers in the future, and we look forward to many new, long-term development opportunities. The worldwide increase in the use of music, and the emergence of new digital business models offer a variety of opportunities that we will actively explore."
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