Bertelsmann chief's plan would avoid IPO
Bertelsmann chairman-CEO Gunter Thielen is putting the German media group on a profitability drive that aims to obviate the need to take the company public.
Previous topper Thomas Middelhoff had pushed for a public stock flotation by 2005.
Delivering his first state of the company address to a gathering of 500 employees Thursday — upon completion of his international fact-finding tour — Thielen stressed that the company is committed to hitting operating margins of 10% while financing modest annual growth internally.
Thielen admitted that the company’s tight cash position meant “there will not be really big acquisitions in the immediate future. However, there will certainly be ancillary acquisitions” such as possible production and broadcast pickups to strengthen European TV unit RTL Group.
“Plenty of synergy potential lies buried there,” he said, noting the huge global success of RTL’s reality show format “Pop Idol” (which aired as “American Idol” on Fox in the U.S.).
Thielen’s whistle-stop tour of the group’s U.S. and European music, publishing and TV businesses over the last month has been accompanied by major reorganization, downsizing plans and increasing speculation over the financial future of the world’s largest privately held media company.
Thielen described five of Bertelsmann’s seven corporate divisions as stable, while noting the other two — BMG and DirectGroup — require considerable work.
He said book publishing behemoth Random House and magazine group Gruner + Jahr suffered from a flat advertising market, but that both were showing signs of recovery. Music group BMG, over which many question marks hang, is striving for breakeven by the end of this year and should generate net earnings beginning in 2003. DirectGroup expects to reach break-even by the end of ’03.
Tuning up buyout
Still unclear, however, is how much Bertelsmann will pay under its obligation to buy out record label Zomba, which it is expected to do by the end of this year. Thielen said x1 billion ($971 million) in reserves have been set aside to purchase the company, though it continues to debate the true value of the label with its management.
In his brief tenure since taking over the reins in August, Thielen has dismantled much of the centralization architecture erected by predecessor Middelhoff, rolled back online music and book distribution projects, and downplayed IPO aspirations.
The more conservative, retro tone is believed to be in keeping with the wishes of the Mohn family, which owns 75% of the company. Still, Albert Frere’s Group Bruzelles Lambert, which owns the balance of the company, could force a stock market flotation of its 25% stake as part of terms of an earlier deal.