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Bertelsmann takes full control of BMG

By | Published on Friday 1 March 2013


German media group Bertelsmann has taken full control of its music company BMG after reaching a deal with equity group KKR to acquire its half of the business.

As much previously reported, Bertelsmann launched the version two BMG company in 2008, having sold the original BMG record company to Sony and music publishing business to Universal. The second gen company works with both master recording and song publishing rights, though is more prolific in the latter, and throughout has said it does not intend to become a conventional record company that takes frequent sizable risks investing in unproven new talent in return for complete control of any recording rights created.

KKR came on board as a partner in the new BMG very early on, providing access to the sort of funds that has enabled the new firm to become a significant player in just a few years by acquiring numerous catalogues and smaller music rights businesses, most notably the Chrysalis publishing company. Most recently BMG acquired the Virgin and Famous publishing and Mute and Sanctuary recordings catalogues that went on the block as part of the split up of EMI.

Reports that KKR was looking to sell out of the BMG venture have circulated for sometime, though the New York Post recently reported that Bertelsmann CEO Thomas Rabe was now talking more openly about his desire to take full control of the music company, and that a deal could be “imminent” providing a price point could be agreed.

That a deal had been reached was announced this morning, with Rabe telling CMU: “This is a great day for Bertelsmann: we are bringing the music home to our group. A few years after our exit from the traditional music business, in association with KKR, we have succeeded in building the world’s fourth largest music rights management business. Our partnership made it possible for BMG to take advantage of consolidation opportunities and to rapidly advance the organic expansion of the business. I thank them for an excellent collaboration”.

He continued: “We are happy to have BMG as our own company again. CEO Hartwig Masuch and his team deserve our thanks for the passion and know how they brought to developing a small creative nucleus into a powerhouse that provides the right answers to the challenges of the music industry in this digital age”.

Speaking for KKR, the group’s Europe boss Johannes Huth added: “Our innovative partnership with Bertelsmann, which combined the professional expertise of a global media company with the financial strength, network and business-building expertise of KKR, was a complete success. We explored new business approaches with Bertelsmann; BMG did pioneering work in the music rights market with its digital, service-focused business approach. The model of a ‘growth and build’ partnership between a corporate group and KKR is bound to be seen more often in the future”.

Terms of the deal, which will need regulator approval, are not known, though it is thought KKR will have made a good return on their investment in the music venture.

Meanwhile BMG boss Hartwig Masuch told CMU: “For BMG, this is a return home. Being a subsidiary of one of the world’s leading media companies opens up more fields of cooperation for us and our customers in the future, and we look forward to many new, long-term development opportunities. The worldwide increase in the use of music, and the emergence of new digital business models offer a variety of opportunities that we will actively explore. We are grateful to KKR for always sharing our vision of an alternative, service-oriented company in the music rights market, and for actively supporting us with their team these past three and a half years. Without KKR, this development would not have been possible”.