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Bertelsmann and KKR in joint music venture

Bertelsmann and Kohlberg Kravis Roberts are creating a joint venture to develop a global music rights management business to which Bertelsmann will contribute its BMG Rights Management

Bertelsmann and Kohlberg Kravis Roberts are creating a joint venture to develop a global music rights management business to which Bertelsmann will contribute its BMG Rights Management music rights unit.

Upon funding of the transaction, Bertelsmann will own 49 per cent in the joint venture and KKR will own 51 per cent.

Bertelsmann’s Hartwig Masuch, currently chief executive of BMG Rights Management, will continue as chief executive of the new company.

The company will benefit from BMG Rights Management’s experience in licensing and administrating music rights, its music catalogues and artists, the BMG brand and its management team.

KKR will enhance BMG Right Management’s financial position and create new growth potential by providing access to its global network.

The partners envisage building a major music rights management business over the medium term through organic growth and acquisitions.

KKR expects to contribute to BMG’s development by providing substantial equity investments through its European private equity funds.

‘KKR shares our views on future business models for the music industry. I am excited to work with such a partner. With many high-visibility contracts and the foundation of an international organisation in six European countries, it has taken BMG Rights Management only nine months to position itself successfully in the market. Songwriters and performers respond very well to our service oriented approach,’ says Masuch.

‘With access to meaningful investment capital, we expect the partnership with KKR to contribute significantly to accelerating the development of the business. We complement each other perfectly for this venture. We both want to broaden BMG’s global reach faster than originally anticipated. In this way we will be able to actively participate in the expected market consolidation,’ says Thomas Rabe, Bertelsmann chief financial officer and chairman of the joint venture.

BMG Rights Management will be integrated into the equity fund Bertelsmann set up two years ago and the company will be developed from this platform. KKR’s funds will invest into a new holding company of BMG Rights Management. The foundation of the new joint venture is subject to approval under applicable competition laws. The parties expect to complete the transaction within a few months.

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