Family firm staying private

BERLIN - Family-controlled Bertelsmann has agreed to buy out the Belgian minority shareholder which had planned an initial public offering of its 25 per cent stake in the German media conglomerate.

Bertelsmann, run by the same family for 171 years, said yesterday it would buy the shares held by Groupe Bruxelles Lambert (GBL), the investment vehicle of Albert Frere, for €4.5 billion ($9.2 billion).

Frere, Belgium's richest man, had said he wanted to float his stake against the wishes of the Mohn family, which controls Random House, publisher of the The Da Vinci Code, and produces Pop Idol.

Frere's stake had been valued at about €4 billion based on a comparison with other media conglomerates. Bertelsmann said this week it was prepared for a buyback at a "reasonable price".

The Mohn family, which controls Bertelsmann, has resisted a share sale for five years even though a 60-year policy of shunning job cuts has contributed to lower operating margins and sales per employee than rivals Time Warner and News Corp.

"Bertelsmann has always tried to take care of its employees and to avoid layoffs in difficult situations," says Maurice Rosenthal, an analyst at Dexia Securities in Brussels. "One of the first things investors would demand is cost cutting."

Bertelsmann's holdings include half of Sony BMG, the world's second-biggest music company.

In its latest corporate responsibility report, the company says one of its goals is to create new jobs and make existing positions "as secure as possible". Employment has risen steadily from 11,185 in 1970 to 88,516 last year.

- BLOOMBERG, REUTERS