Bertelsmann Sells Music Club Unit
July 11, 2008
By Ed Christman, N.Y.
Even as Bertelsmann A.G. considers selling its stake in Sony BMG Music Entertainment, the media giant has agreed to sell its Direct Group North America unit to Najafi Cos., a Phoenix-based private equity firm. Terms of the deal were not disclosed, but it is expected to close in the third quarter this year.
The unit includes the Columbia House assets, the BMG Music Clubs, a DVD club, and the Bookspan book club. While the company doesn't break out full results for the unit, according to Bertelsmann's 2007 financial results, the Direct Group North America had revenues of at least €939.6 million or $1.38 billion, excluding its Canadian operations, in the fiscal year ended Dec. 31, 2007.
The company also noted that the Direct Group North America had €291 million ($428 million) write-off due to impairment of good will and other intangible assets.
While the company never broke out revenue by product lines, record club sales were so weak that the company said expected to discontinue that business by 2010, Bertelesmann said when it disclosed its year-end financial results.
The Direct Group management team, headed up by Stuart Goldfarb, will remain in place says Najafi CEO Jahm Najafi. "Our mode is to acquire operating companies and to work with management teams," Najafi says. "Exit strategies is not a variable that we analyze when we acquire companies. The way we look at a deal is for holding it for a long time."
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