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(Updates with fund manager comment in fourth paragraph.)
Oct. 10 (Bloomberg) -- Bertelsmann AG, Europe’s biggest media company and owner of publisher Random House, named Chief Financial Officer Thomas Rabe as chief executive officer to succeed Hartmut Ostrowski as it aims to expand via acquisitions.
Rabe, 46, will take over on Jan. 1 and Ostrowski, 53, will join the company’s supervisory board, the Guetersloh, Germany- based company said in a statement today. Ostrowski is resigning from the executive board for “personal reasons,” Bertelsmann said, adding that the change are taking place “amicably and by mutual consent.”
Rabe, who on Aug. 31 said that music company EMI Group Ltd. would fit into the acquisition strategy of Bertelsmann’s BMG Rights Management unit, has been CFO at Bertelsmann since 2006. Months after taking over, he helped to orchestrate the 4.5 billion-euro ($6.2 billion) buyback of a Bertelsmann stake from Belgian billionaire Albert Frere. One of Rabe’s main challenges is to bolster the digital business, said Thilo Mueller, CEO of MB Fund Advisory, which manages 120 million euros.
The transition to new digital platforms such as Apple Inc.’s iPad “is very important for a company like Bertelsmann” and its success is “closely linked with the management,” Mueller said. “With media executives, their far-sightedness, creativity and strategic approach are far more important” than in other industries,” he said.
Media businesses such as Bertelsmann, whose assets also include Europe’s biggest magazine publisher Gruner + Jahr, are trying to bolster revenue from digital and Web assets to make up for slower growth at traditional newspaper, magazine and printing services. Axel Springer AG, Europe’s largest newspaper publisher and Bertelsmann’s biggest German rival, said Aug. 3 that it wants to generate about half of revenue from Internet channels such as publications’ websites and advertising portals within seven years.
Bertelsmann is looking for acquisitions after it returned to profit this year helped by rising advertising sales at broadcaster RTL Group, Europe’s biggest broadcaster. Rabe was finance chief of RTL from 2000 to 2005. He also had stints at the European Commission and law firm Forrester, Norall & Sutton.
Rabe was in charge of negotiating deals such as the sale of the music-publishing business to Vivendi SA in 2006 and the disposal of a 50 percent stake in the recorded-music unit in 2008. Rabe, who once played bass guitar in a band, also supervised the takeover of music publishers such as Cherry Lane Music Publishing and Evergreen Copyrights by BMG Rights Management, the company’s music rights venture with KKR & Co.
Citigroup Inc. may receive lower bids than expected for EMI Group due to tight credit markets and may be forced to break up the record label or halt the sale, several people with knowledge of the matter said this month. Vivendi SA’s Universal Music Group is interested in EMI’s recorded-music business, these people said. Sony Corp. and BMG Rights Management are separately interested in EMI’s publishing business, said two people.
BMG Rights Management also made bids for three different sets of assets from Warner Music, two people familiar with the talks said March 23. Warner Music this year agreed to be acquired by billionaire Len Blavatnik for almost $3 billion.
Asked whether Bertelsmann would consider bidding for EMI, Rabe told reporters in August that the company has more flexibility in financing acquisitions because it is closely held. He declined to comment further on the EMI sales process, adding that Europe’s largest media company is as “prudent” as before and that its spending policy hasn’t changed amid the turmoil in capital markets.
‘Next Expansive Stage’
“The groundwork has been laid for leading Bertelsmann into the next expansive stage of development,” supervisory board Chairman Gunter Thielen told employees in an internal letter obtained by Bloomberg News. “In Thomas, I am positive that we have an entrepreneur at the top who will lend momentum to Bertelsmann’s growth strategy and future development.”
Bertelsmann’s debt ballooned in 2006 through the buyback of a stake from Albert Frere’s Groupe Bruxelles Lambert SA. The purchase returned full control of the company to the Mohn family. Following the deal, Rabe oversaw the reduction of debt and the company said in March that it could spend as much as 1 billion euros on acquisitions this year.
--Editors: Simon Thiel, Kenneth Wong.
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