Bertelsmann To Acquire Columbia House

BMG Direct, a division of German media company DirectGroup Bertelsmann, announced an agreement with investment and advisory firm Blackstone Group to acquire membership-based DVD and music club Columbia House.

With the combined companies, Bertelsmann hopes to create about $1.5 billion in annual revenue and host some 16 million club members in the U.S. and Canada, according to The Wall Street Journal.

Bertelsmann did not disclose the terms of the deal but WSJ reported it was worth approximately $400 million.

Columbia House has some 8 million members in the United States, Mexico and Canada. The company sells music online and through the mail. BMG Direct operates its own mail-order retail business, sending out more than 68 million catalogs annually and servicing millions of others through its Web site.

“This move gives us strategic access to the growing business with DVDs, as well as broadening our customer base in the U.S. market,” DirectGroup Bertelsmann CEO Ewald Walgenbach said.

The company’s reach encompasses nearly all forms of media, with publishing, music sales and broadcasting operations in approximately 60 countries.

New York-based Columbia House is 85 percent owned by Blackstone Group. Sony Corp. and Time Warner Inc. each hold 7.5 percent stakes.

Stuart Goldfarb, president/CEO of BMG Direct, will serve in the same position for the newly acquired company.

“Columbia House is the market leader in the DVD business,” Goldfarb said. “This transaction provides great opportunities for us and for our customers, who now will be able to access a broad selection both of music and DVD titles … .”