Bertelsmann Holds On to Magazine Unit Gruner + Jahr

Thomas Rabe - PR Head Shot - H - 2011

Bertelsmann will retain its majority stake in the publishing group as it overhauls its worldwide operation.

COLOGNE, Germany – German media giant Bertelsmann is holding on to its majority stake in Gruner + Jahr, the publishing giant it owns together with the Jahr Holding. Gruner + Jahr is Germany's leading publishing group and owns dozens of magazine and newspaper titles including newsweekly Stern and entertainment title Gala.

Gruner + Jahr accounted for 15 percent of Bertelsmann's revenues last year, earning $3 billion (€2.29 billion) in revenues. But operating profits at the print-driven business have slipped as Gruner + Jahr's titles face increasing competition for online offerings. Operating EBIT at Gruner + Jahr in the first half of this year fell €37 million to $111 million (€85 million) as the group's return on sales dropped to 7.6 percent from just over 11 percent over the same period last year.

Bertelsmann CEO Thomas Rabe recently announced an overhaul of the company's global operations, saying Bertelsmann needs to shift its focus from its core markets in Western Europe, where growth is sluggish, to rapidly expanding territories in Asia and South America. Rabe has also said Bertelsmann's old media businesses must be hauled into the digital age, although he admitted the conglomerate does not have all the know-how in-house to facilitate the transition.

Against this backdrop, all of Bertelsmann's businesses are under the spotlight and there had been speculation that Rabe was reassessing the company's stake in Gruner + Jahr. But on Friday, Bertelsmann confirmed it would hold on to its 74.9 percent share of the publishing group, with the founding Jahr family controlling the rest.

"We will expand G+J’s strong position in the media business, promote the digitization of its content and brands, and provide the necessary resources. Bertelsmann remains committed to quality journalism as a core business,” Rabe said in a statement.

Winfried Steeger, managing director of Jahr Holding added that after “intensive and constructive” talks with Bertelsmann, the two firms came to the conclusion “that the challenges ahead for G+J can best be mastered together.”

There is continued speculation over the future of Bertelsmann's holding in RTL Group, Europe's largest broadcaster, in which Bertelsmann currently holds a 92.3 percent state. A recent change to the takeover laws in Luxembourg, where RTL is based, would allow Bertelsmann to more easily squeeze out the minority shareholders. If Bertelsmann bought out RTL entirely and took the company private, it would give the group full control over RTL's healthy cash-flow, money Rabe could use to help finance his ambitious international expansion plans. Incorporating RTL fully into Bertelsmann could also be a first step towards an initial public offering for the German media giant.