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BMG not for sale, Middlehoff says

Bertelsmann's alliance with Napster altered situation

BERLIN — Thomas Middelhoff, chief exec of German media giant Bertelsmann, has said the group’s music division, BMG, will not be put on the block following the collapse of merger talks with the U.K.’s EMI Group.

“There will be no sale of BMG,” Middelhoff said in a Saturday interview with German daily Sueddeutsche Zeitung. BMG and EMI were unable to leap over regulatory hurdles last week after months of negotiations.

Middelhoff, who last year said the sale of BMG could be possible under certain conditions, declared that the company’s recent alliance with Napster had altered the situation.

“At the time I was worried that we could be sandwiched between unrestricted online distribution and the stagnation in the CD business,” Middelhoff told the paper, adding that the group is now market leader in digital music distribution.

BMG ranks fifth among major labels, behind Universal, Sony, EMI and Warner.

Company said last week it would seek more cooperative deals or small acquisitions following the collapse of the EMI deal.

With Bertelsmann’s full-year results due June 30, Middelhoff said he expects an increase in net profit above the previous year’s DM1.3 billion ($592.8 million). Company revenue is expected to surpass $18 billion.

Meanwhile, in a report to be published today, German weekly Der Spiegel said BMG could post full-year losses of $82 million after missing earnings targets.

Magazine, citing an internal company document, said EBIT figures in the first half-year suffered from writeoffs of unsuccessful labels and shareholdings. Severance payments to former BMG managers of more than $7 million also affected earnings, Der Spiegel said.

Bertelsmann declined to comment on company division results before the end of the fiscal year, but said it expects BMG’s results to be flat with the previous year. Company did admit that one-off charges, structural changes and the introduction of new management at the end of 2000 added to BMG’s costs in the current 2000-01 business year. Last year BMG reported a 23% boost in operating profit from the previous year to $199 million and sales of $4.2 billion.

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