Investment Group to Buy Bertelsmann Direct Group North America  

by Jim Milliot -- Publishers Weekly, 7/11/2008 7:14:00 AM

Bertelsmann has found a buyer for its North American book, DVD and music club business, and as expected, it is a private firm. Najafi Companies, based in Phoenix, Ariz., has agreed to acquire the struggling company for an undisclosed price. Details about the deal were scarce this morning, with the companies saying they hope to complete the transaction in this year’s third quarter. Bertelsmann put the North American business, home to the former Bookspan as well as Columbia House, on the block in March.

Jahm Najafi, CEO of the Najafi Companies, said in a prepared statement: “We are very excited to enter the direct-to-consumer business and to work closely with Direct Group North America’s management team to ensure the future success and growth of the company. We believe that the winning combination of great brands and dedicated employees signals an exciting new chapter in this company’s story.” Najafi Companies describes itself as a firm the makes selective investments across a variety of industries “often in industries out of favor.” (Najafi recently bought a substantial portion of the assets of Trend Homes, Inc., a home building company, and several of its affiliates for $86.5 million). It says it takes a long view on its investment and generates capital internally, removing it from the pressure to return capital to outside partners.

Bertelsmann’s North America Direct Group has been struggling for several years as book and music clubs have lost ground to Internet alternatives. In March, Bertelsmann acknowledged that sales in the North America division declines as club membership fell sharply and sales per member also dropped. The company also reported that it incurred 123 million euros in integration and restructuring charges plus write-downs of 291 million euros directly related to the company’s North America club activities.

Thomas Rabe, Bertelsmann CFO and who oversees the Direct Group North America, said Bertelsmann remains committed to the U.S. market and will “redirect resources to other business opportunities.”