German giant leaves US

12th July 2008, Comments 0 comments

German media giant Bertelsmann is to pull out of the US following a decline in sales

Guetersloh, Germany -- Media multinational Bertelsmann said Friday it had sold its US book-club businesses, Direct Group, to a US private-equity investor Najafi Companies, based in Phoenix, Arizona.

The contract had been signed and would likely take effect in the third quarter of this year, said Bertelsmann, which has its head office in Guetersloh, Germany. It said both sides had agreed to keep the terms confidential.

Direct Group sells books, CD music and DVD movies by mail. Its US brands include Columbia House and Bookspan.

The business model, which has suffered with the advent of music and movie recording downloads, requires buyers to commit themselves to regular purchases in exchange for discounts.

Annual revenue at Direct Group has been about 1.4 billion dollars, but the business has been sluggish.

The subsidiary hurt the group with a writedown of 291 million euros last year, only two years after family-owned Bertelsmann paid nearly 500 million dollars to acquire Columbia House.

Najafi said it would work closely with the existing management and expand the business.

Bertelsmann, which grew on the back of a book-club business into one of the world's biggest media groups with annual revenue of 19 billion euros (30 billion dollars), is heavily invested in television and book publishing.

Its European book clubs were not part of the sale, but Bertelsmann has said it will also review their future by the middle of next year. The group has already been backing out of the music recordings business as sales in that sector in the slump. DPA

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