* Bertelsmann contributes BMG Rights, for 49 pct of JV
* JV to run for 5 years
* KKR to invest 50 mln euros for near term, 200 mln later
FRANKFURT, July 8 Media group Bertelsmann
[BERT.UL] plans to speed growth of its music rights management
business by forming a joint venture with the private equity firm
Kohlberg Kravis Roberts & Co [KKR.UL].
Bertelsmann will contribute its BMG Rights Management music
rights unit, whose catalogue includes the work of Kylie Minogue
and Roy Orbison, and own 49 percent in the joint venture, which
is set to run for five years, the two companies said on
KKR will invest 50 million euros ($69.6 million) to finance
near-term growth and would commit to invest an additional 200
million euros over the coming years to finance possible
acquisitions, a spokeswoman said.
"With access to meaningful investment capital, we expect the
partnership with KKR to contribute significantly to accelerating
the development of the business," Bertelsmann Chief Financial
Officer Thomas Rabe said in a statement.
"This way we will be able to actively participate in the
expected market consolidation," added Rabe, who is also chairman
of the joint venture.
Bertelsmann would also be willing to contribute capital to
help grow the business, whose staff will grow to around 100 in
the mid-term from 30 at first.
Reports of the deal in the German press had speculated that
such a venture could look for acquisition targets such as EMI
Group's music publishing assets. EMI is owned by British private
equity firm Terra Firma [TERA.UL].
A person familiar with the thinking at both companies told
Reuters: "That will definitely be looked at."
Both Bertelsmann and KKR said interest focused on small
The deal could be a more efficient way of managing rights
under one roof, and would mark a more aggressive push into the
music business for the privately held German media conglomerate,
which has largely exited the industry.
Bertelsmann pulled out of a recorded music joint venture
with Sony Corp (6758.T) in August 2008 and sold its music
publishing business in 2006 to Universal for 1.63 billion euros.
At the time, KKR had been one of the bidders for the business.
However, in October it announced plans to build a new music
rights business called BMG Rights Management.
It launched that business with a selection of European music
catalogues retained from the venture with Sony, which included
about 200 artists such as the Scorpions and Terence Trent
D'Arby, the company has previously said.
It has since added around 100 artists.
Bertelsmann's Hartwig Masuch, an old hand in the music
industry and head of BMG Rights Management, will continue as
chief executive of the new company.
The deal marks the latest in a string of investments made by
pension funds and private equity firms into high-profile music
Investors are attracted by catalogues of published songs
that provide steady, recurring cash flows as CD sales rapidly
decline and music piracy hits profits in the music industry.
Dutch fund ABP, the world's third-largest state pension
fund, earlier this year bought the legendary Rodgers &
Hammerstein catalogue of songs. ABP also owns music catalogues
that include rights to some songs by Michael Jackson -- and
demand for music by the "King of Pop" has rocketed since his
A separate deal saw private equity firm Pegasus Capital pay
an estimated $55 million for Spirit Music Group, a song
publisher with rights to some of the works of artists ranging
from Frank Sinatra to Madonna.
(Reporting by Alexander Huebner in Frankfurt, Megan Davies and
Yinka Adegoke in New York; Writing by Nicola Leske, editing by