Bertelsmann Stock Swap Paves Way for IPO
Herbert R. Lottman -- 2/12/01

In what is surely its biggest corporate restructuring since Bertelsmann began to expand outside of its native Germany, a stock swap between the Gütersloh group and the Belgian investors who share ownership in the RTL Group will result in Bertelsmann's cession of 25% of its voting stock to the latter. Bertelsmann already held 37% of RTL, which is Europe's leading TV, radio and film production group, while 30% was in the hands of Groupe Bruxelles Lambert and 22% belonged to the U.K.'s Pearson. With the Belgian shares, Bertelsmann now holds a 67% majority of RTL, Pearson keeps its 22% and 11% remain in the hands of individual stockholders.

With this move the Lambert group, majority-owned by private entrepreneurs Albert Frère and Paul Desmarais, becomes a minority partner in Bertelsmann, with two seats on the supervisory board. Moreover, Lambert has the option of putting all or part of its Bertelsmann holding on the stock market in three to four years. The agreement is subject to approval by the boards of the two partners, as well as by relevant regulatory and antitrust authorities.

The news caused a sensation in Europe, where RTL is even better known than the German media giant. For its part, Bertelsmann revealed that the "inner circle" of its executive board, chaired by Thomas Middelhoff, had been planning the move for a number of months with the active involvement of chief owner Reinhard Mohn, who until recently was virtually the only holder of voting rights. The consensus was that Bertelsmann had found a groundbreaking way to adjust to changing conditions and to use its shares as acquisition currency, all the while maintaining its independence. In a prepared statement Mohn pointed out that the two groups, German and Belgian, already shared a relationship requiring mutual trust. And in a statement of their own, the Lambert partners spoke of investing for the long term, offering their own shareholders the opportunity to participate in the growth of one of the world's leading media groups.

Bertelsmann CEO Middelhoff noted that the swap strengthens Bertelsmann's position as a driving force in TV, a future growth market. RTL's "magnetism," he said, could be "leveraged for many media consumer communities throughout the various sectors and product lines." The RTL Group was created last April through the merger of CLT-UFA and Pearson TV, and brings together 22 TV channels and 18 radio stations in 11 countries.

After the dust settles, the distribution of capital at Bertelsmann will be: Mohn family, 17.3%; Bertelsmann Foundation, 57.6%, for a total of 74.9%. The remaining 25.1% will be in the hands of Lambert, but only 25% will have voting rights, giving Bertelsmann a clear 75% majority.