Five owner Bertelsmann buys out independent investor

by Mark Banham, Brand Republic 25-May-06, 10:46

LONDON - German media network Bertelsmann, parent company of UK broadcaster Five, has made a €4.5bn (£3bn) deal to buy back an independent 21.5% shareholding in the group held by Groupe Bruxelles Lambert.

The deal, which is to be pushed through for July 1 and will be funded by the sale of the company's record company BMG and with the help of bank loans, means that the media company comes under complete control of the Mohn family and its foundation.

Gunter Thielen, chairman of the Bertelsmann executive board, said: "The board and the majority shareholder are convinced that the share buyback is the best option to secure the continuity and the successful development of the company on the basis of our corporate culture of partnership. Bertelsmann is in an excellent position and will achieve record results in 2006.

"Against this background and the expected development in the next years, the purchase price agreed with GBL is reasonable. The company will maintain full strategic flexibility to further develop its businesses. Bertelsmann has proven time and again during its long history that it has the ability to expand internationally and build leading market positions."

A spokeswoman for the Mohn family said: "[The deal] guarantees the independence of the company and its lasting and sustained development on the basis of our proven corporate culture. It secures the greatest possible freedom for the executive board to manage the business.

"The buyback will be financed with a bridge loan provided by several banks. A significant part of the loan will be repaid over the next 12 to 18 months by retained cash flows from operations as well as by expected proceeds from the divestiture of BMG Music Publishing. The auction process for the divestiture of this business to which Bertelsmann will invite selected bidders will start in June."

The transaction was brokered under advice from merchant bank JP Morgan and investment bank CitiGroup.

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