Bertelsmann on Mergers and Acquisitions Path In 2011
Bertelsmann on Mergers and Acquisitions Path In 2011

Europe's biggest media group Bertelsmann BERT.UL said it had the financial muscle to look at acquisitions again after reducing its debt, and would look at Warner Music Group (WMG.N) and possibly EMI.

Bertelsmann, which launched its biggest-ever cost saving program in 2009 to combat the impact of the financial crisis, reduce its debt and fight a steep decline in advertising markets, has high hopes for its music-rights business BMG.

"Restructuring is pretty much done and debt is no longer an issue," Chief Financial Officer Thomas Rabe said on Tuesday, promising continued growth this year after 2010 group sales rose 4.5 percent to 15.8 billion euros ($22.3 billion).

"Financially speaking, Bertelsmann is ready to invest again," he told a news conference, adding that the German media group could spend 1 billion euros on acquisitions.

Bertelsmann wants to expand BMG, a joint venture it runs with KKR (KKR.N), to become one of the leading music-rights companies worldwide in the medium term.

Rabe said financial debt was now at 1.9 billion euros, leaving the company with a leverage factor of 2.3, below the company's target of 2.5.

Rabe said he expected another potential target -- British music company EMI -- to be on the market soon too. Citigroup (C.N) took control of debt-laden EMI last month and is expected to put it up for sale soon.

"One can assume a bank will not run a music business and that it will be on the market," Rabe said.
Warner Music, the world's No. 3 music company, appointed Goldman Sachs and Alan Mnuchin's AGM Partners in January to explore sale options for the company after management was approached by a potential buyer.

More than five parties have got through to the second round of bidding, a person familiar with the process told Reuters earlier this month.

Bertelsmann Chief Executive Hartmut Ostrowski told a press conference that Bertelsmann was ready to invest in "the right business at the right price and the right time."

"We are not under pressure... but I can tell you that we will use a significant part of the means available to invest for new growth areas," Ostrowski said.

"If the economic expectations in our core geographic markets are met, Bertelsmann expects moderate revenue growth in 2011," he also said, adding that the company aims to keep its operating result stable and increase its group profit this year.

Earnings before interest, tax and special items grew by nearly a third to 1.85 billion euros in 2010, and group net profit was 656 million euros compared with 621 million euros in the previous year.

Bertelsmann, which was founded in the small German town of Guetersloh in 1835, also owns European broadcaster RTL Group AUDK.LU and book publisher Random House.

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