BMG Direct, parent of the BMG Music Service record club, is acquiring rival direct marketer, the Columbia House Co., from an ownership consortium led by the Blackstone Group. Sources value the deal a

BMG Direct, parent of the BMG Music Service record club, is acquiring rival direct marketer, the Columbia House Co., from an ownership consortium led by the Blackstone Group. Sources value the deal at $400 million.

Stuart Goldfarb, president/CEO of BMG Direct, will serve as president and CEO of the newly acquired company. Columbia House chairman/CEO Scott Flanders will exit the company following a transition period. The newly formed company will have annual revenue of $1.5 billion and 16 million members in North America.

BMG Direct-a unit of DirectGroup Bertelsmann-operates the largest music club operation in the United States, while Columbia House is a leader in DVD clubs.

Columbia House claims $800 million in annual revenues, sources say; BMG Direct has estimated revenues of $700 million. Both have membership bases of roughly 8 million.

“The combined BMG Direct and Columbia House entity will offer a broader selection of products to a larger customer base, while at the same time creating cost efficiencies,” Ewald Walgenbach, CEO of DirectGroup Bertelsmann said in a statement.

Blackstone Group purchased an 85% stake in Columbia House in 2002 for $410 million from Sony Music and Time Warner, which continued to hold minority stakes in the company.

Sony and Time Warner are selling their remaining 7.5% stakes in Columbia House as part of the transaction.

Completion of the deal is subject to regulatory approval. It is expected to close late this year.

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