September 26, 2023

DealBook: After Stellar Year, Bertelsmann Thinks Deals


3:43 p.m. | Updated

BERLIN — Bertelsmann, the German media conglomerate, said Tuesday that it was interested in buying the music publishing arms of the Warner Music Group and EMI, adding that a surge in profitability and a reduction in debt had made it eager to invest again.

For the most part, Bertelsmann got out of the music business less than three years ago, when it sold its 50 percent share in Sony BMG, one of the four major record companies, to Sony. Since then, however, the company has been building a new music rights management operation with the private equity firm Kohlberg Kravis Roberts.

Warner Music was recently put up for sale. EMI has been taken over by Citigroup from its private equity owner, Terra Firma. The takeover followed a failed lawsuit by Terra Firma against the bank, its main lender and adviser in the EMI deal. Citigroup has not put EMI up for sale, but analysts say the bank is unlikely to want EMI for the long term.

With sales of compact discs continuing to fall, the record industry’s prospects have not improved since Bertelsmann sold out to Sony. Thomas Rabe, Bertelsmann’s chief financial officer, said the company was interested only in the publishing and rights management operations of EMI and Warner. Those businesses, which own the companies’ back catalogs, continue to generate steady income.

“We are on the right track to become one of the biggest and best-managed music rights businesses in the world,” Mr. Rabe said at a news conference. “We are on the right track to do this through organic growth and further acquisitions.”

Bertelsmann said it was ready to consider acquisitions again because it had reduced its debt to 1.9 billion euros, or $2.7 billion, from 2.8 billion euros over the past year. Meanwhile, the company, which is privately held, benefited from a rebound in the media sector, with profit surging to 656 million euros last year from 35 million euros a year earlier. The company’s European television and radio broadcasting business, RTL, and its German publishing arm, Gruner Jahr, posted particularly strong gains.

“Bertelsmann, ladies and gentlemen, is ready to invest — in the right business, at the right price and the right time,” said Hartmut Ostrowski, the company’s chief executive.

The Bertelsmann/K.K.R. venture is not the only party interested in Warner. Other potential bidders reportedly include Len Blavatnik, a Russian-born investor, and Ron Burkle, an American supermarket owner. And EMI executives have said they want to keep the company’s recorded music and publishing arms together.

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