GBL Group (“GBL”) jointly controlled by the Desmarais and Frère families  and the Bertelsmann Group (“Bertelsmann”) controlled by the Mohn family have decided to build on their partnership and consolidate existing ties by having GBL exchange its 30 % interest in RTL Group (“RTL”) for a 25 % stake in Bertelsmann.

 

Contributing its interest in RTL for a position in Bertelsmann constitutes a major move for GBL and a sign of its willingness to invest strategically for the long term. It offers its shareholders the unique opportunity to share in the expansion of one of the world’s leading media groups.

 

In a context of industry consolidation, the partners consider the concentration of 67 % of RTL within Bertelsmann with its highly regarded management team and proven track record, as an exceptional opportunity to achieve RTL’s full potential and to take advantage of synergies with the group's content and distribution activities.

 

Through the transaction announced today, Bertelsmann strengthens its position in the television and radio business and moves towards the objective of its shareholders and managers to take the company public in the medium term. GBL has the right to request the IPO.

 

Bertelsmann will continue to base its expansion on the managerial practices that have made it successful in the past. It will rely in particular on its entrepreneurial and decentralised approach which respects local talent and cultural identities.

 

GBL will assume its role as a significant shareholder alongside Bertelsmann’s founding family interests.

GBL will be represented on the board and board committees of Bertelsmann itself and of various foreign subsidiaries including in particular RTL Group with which it will retain close ties.

 

This transaction is subject to the completion of due diligence, to the finalisation of a long form agreement and to the approval of the boards and the relevant regulatory authorities.

 

Mssrs Desmarais and Frère state : "We are delighted of this opportunity to strengthen our ties with the Bertelsmann Group which we have grown to know and appreciate over the years. This operation constitutes a major strategic move for GBL and offers our shareholders the prospect of participating in the development of one of the world's leading media groups."

 

Post-war corporate founder and philanthropist Reinhard Mohn remarks: “I look forward to working with our new shareholder, with whom we already share a mutually trusting cooperation. We have found a partner who will help us ensure that our work remains efficient, purposeful, up-to-date and results-oriented. At the same time, Bertelsmann will remain true to itself. We will determine our own path and the shape that our cooperation takes. Our unique corporate culture will continue to develop in our spirit – here as well as internationally.”

 

Bertelsmann Chairman and CEO Thomas Middelhoff declares: “From both a strategic and a historic point of view, this is a significant step that will lastingly shape the company’s future. It will strengthen Bertelsmann’s position as the driving force in television, a future growth market. The RTL Group has a central meaning in Bertelsmann’s corporate strategy. The brand’s magnetism can be leveraged and developed for many media consumer communities throughout the various sectors and product lines. We have longstanding friendly ties with GBL and welcome them as a new shareholder. Bertelsmann’s unique corporate culture will remain intact even in the event of a possible IPO in about three years from now.”

 

Didier Bellens, Chief Executive Officer of RTL Group, says : "RTL Group’s clear focus is to strengthen its unique position as Europe’s leading broadcasting and production company. With its vision and its strong strategic interests in our businesses, Bertelsmann has given support at every stage of our development and has been one of the major driving forces behind our growth. RTL Group and Bertelsmann share a single vision to shape the media of the future and to reach audiences across many countries. Under this new shareholding structure, we will be able to pursue our common strategic ambitions with even greater focus and determination."

 

About GBL

 

Groupe Bruxelles Lambert S.A. (GBL) is an investment company jointly controlled by the Desmarais and Frère families through their respective companies. GBL, which has a market capitalisation of Eur 6.1 billion, aims to grow a rich and balanced portfolio of industrial investments, focusing on a small number of first-class companies acting in a diversified range of sectors, in which GBL can exercise its role as a professional shareholder. GBL's current portfolio includes five long-term investments : RTL Group, TotalFina Elf, Suez Lyonnaise des Eaux, Imerys and Rhodia held directly or through Electrafina.

 

Since the merger of CLT and UFA in 1997, GBL has participated, through its joint venture with Bertelsmann, in the development of CLT-UFA as a major European broadcasting group.  On April 2000, CLT-UFA merged with Pearson TV, the world's leading international independent television production company, to create the world's leading pan-European integrated broadcast and content company, listed under the name RTL Group.

 

Group GBL's 30 % stake in RTL Group represents roughly 40 % of its estimated value. 54.6 % of GBL are held by Pargesa.

 

About Bertelsmann

 

One of the wold’s leading media group, Bertelsmann has a workforce of some 76,000 in 58 countries. It includes renowned book publishers and music companies, book and music clubs, magazines and newspapers publishers, television and radio stations,  printing and media services, multimedia and professional information publishers.

 

For the fiscal year ending on 30 June 2000, the group had turnover of EUR 16.5 billion, EBITA (earnings before interest, taxes and amortization) of EUR 1.8  billion and net profits of EUR 672 million (minority share included).

 

34% of sales are accounted for by the US market, 31% by Germany and 35% by the rest of the world.

 

The group's structure comprises seven divisions:

 

1.      Random House

 

Random House pools the worldwide Bertelsmann book publishing activities. Outstanding among them is the world's largest publisher of books in English for the general public, the Random House Group. 145 Random House Inc. titlesmade The New York Times’ Bestsellers list (of which the well known Michael Crichton books) It also has a strong market presence for books in German and Spanish language.

 

With 19,000 employees, it had turnover of EUR 4.3 billion for the year ending on 30 June 2000 (still including the book clubs and book direct selling operations that have now been integrated in the Direct Group).

 

Geographical breakdown of turnover:

                  United States: 39%

                 Germany / Austria / Switzerland: 22%

                  Rest of Europe: 36%

                  Rest of the world: 3%

 

Breakdown of turnover by branch:

            Book clubs: 52%

            Book publishing: 44%

            Direct marketing: 4%

 

2.      BMG

 

BMG's activities consist of BMG Entertainment (music and video recording and publishing, distribution, direct marketing) and Storage Media/Sonopress, whose activity includes CD and DVD replication, digital assembly and distribution, etc.

BMG Entertainment, by far the leading activity in this division, is one of the world's top five record companies, with 12% of the market, and the biggest distributor of singles in the USA.  BMG owns more than 200 labels (including Arista, RCA, Ariola, BMG and others), and works with numerous wold stars including Santana, Puff Daddy, Tony Braxton, Whitney Houston, Annie Lennox… 

BMG operates more than 30 internet sites that are developing its brands on line.

 

This activity occupies 11,700 employees and generated turnover of EUR 4.8 billion in 2000.

 

Geographical breakdown of turnover:

                  United States: 57%

                  Germany / Austria / Switzerland: 11%

                  Rest of Europe: 18%

                  Asia-Pacific: 9%

                  Latin America: 5%

 

3.      Gruner + Jahr

 

Gruner + Jahr (G + J), 74.9% owned by BAG and 25.1% by the Jahr family, is Europe's leading magazine publisher. It publishes over 100 magazines and newspapers in 14 countries. G + J's biggest selling titles include "TV Today", “Gala”, "Stern", "Brigitte" and "Geo".  The group regularly launches new titles, including the successful european "National Geographic" in 1999 and the "Financial Times Deutschland" in 2000, in a joint venture with Pearson.

G + J is Germany's number one publisher of magazines for the general public. 

In France, the local subsidiary of G + J, Prisma Presse, ranks number two in a very competitive market.

In Germany, 42% of the market is subscription based, which is financially advantageous and gives G + J a sizeable data base for advertisers and e-commerce.

Bertelsmann was one of the first publishers to make its titles available on internet.

 

With 12,000 employees, G + J posted turnover of EUR 2.9 billion in 2000.

 

Breakdown of turnover by branch:

                  Advertising: 42%

                  Distribution: 31%

                  Printing: 18%

                  Other: 9%

 

Geographical breakdown of turnover:

                  Germany: 43%

                  United States: 25%

                  Rest of the world: 32%

 

4.      RTL Group

 

Following the alliance concluded by Audiofina, CLT-UFA and Pearson, announced on 7 April 2000, RTL Group is, before the present contribution by GBL, 37% owned by BW TV, itself owned by BAG (80%) and WAZ (20%).

 

RTL Group is the number one combined television, radio and content group in Europe.

 

Its turnover for 2000 is expected to amount to EUR 4.2 billion, for a workforce of 6,000.

 

Breakdown of turnover by branch:

                  Television: 69%

                  Content: 23%

                  Radio: 6%

                  New media + other: 2%

 

Geographical breakdown of turnover:

                  Germany: 53%

                  UK: 20%

                  France: 15%

                  Netherlands: 8%

                  Rest of the world: 4%

 

5.      Bertelsmann Springer

 

Bertelsmann Springer publishes some 700 special interest business and trade magazines, technical journals and books and CD-ROMs, provides on-line services and data bases, and organises seminars, trade fairs and conferences in the STM (science, technology, medicine) sector.  It also provides business-to-business services in the construction and transport sectors.

 

This division generated turnover of EUR 0.7 billion in 2000 and employs 5,000.

 

Breakdown of turnover by branch:

                  Scientific publications: 48%

                 Business-to-business: 26%

                  Business and trade publications: 17%

                  Printing: 9%

 

Geographical breakdown of turnover:

                  Germany: 66%

                  United States: 13%

                  Other European countries: 13%

                  France: 5%

                  Asia: 3%

 

6.      Arvato

 

Arvato is an international provider of media services for targeted markets.  Its activities  include printing, IT services, multimedia and specific publications. The group includes some of the most advanced offset and rotogravure printers in Germany and abroad..

 

Arvato has 17,000 employees and generated turnover of EUR 2.2 billion in 2000.

 

Breakdown of turnover by branch:

                  Printing Germany: 36%

                  Services: 32%

                  Printing outside of Germany: 24%

                  Special publications: 8%

 

Geographical breakdown of turnover:

                  Germany: 67%

                  Rest of Europe: 19%

                  North and South America: 14%

 

7.      Direct Group

 

This division was created in 2000 as a result of a restructuring.  The new structure will be fully operational in spring 2001.

 

Direct Group will consolidate all the activities of the former multimedia and e-commerce division, along with club activities (books and music).

 

Bertelsmann invented the concept of book and music clubs and today boasts some 40 million members.  One of the ambitions of the division is to convert all these members into on-line users.

 

In April 1998, BAG created BOL, which has grown into one of the biggest book and CD sites on internet. BOL is accessible in several languages in 15 countries and has more than one million registered customers.

 

BAG also bought 39% of Barnes & Nobles.com in 1998 and 100% of CD Now in 2000 (on-line sales of CDs with 4.8 million customers in the USA). It set up a joint venture with Lycos (which has meantime become Terra-Lycos), Lycos Europe, which has over 6 million users in Europe. BAG indirectly owns 19.3% of that venture.

 

BAG has a strategic agreement with Napster, the largest music exchange worldwide with currently 60 million users, for the development of a secure on-line payment means for CD sales . It  owns 58% of Pixelpark, an internet consultancy floated on the Neuer Markt in 1999.

 

With a large diversity of e-commerce activities and a number of strategic global alliances, the company can poentially reach 200 million users.

 

Direct Group did not exist as such on 30 June 2000; its pro forma turnover would have amounted to EUR 2.3 billion for 10,000 employees.

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