FRANKFURT Bertelsmann, Europe's largest media company, is buying private equity firm KKR's stake in their joint venture music rights management company BMG.
The German group, best known for its TV arm RTL and publisher Random House, said on Friday the deal would close during the first half of the year, adding it would not disclose financial terms.
A person familiar with the matter told Reuters the purchase price was 700-800 million euros ($915 million-$1.05 billion) including debt. Bertelsmann will pay the sum out of its cash reserves, another person familiar with the deal said.
BMG is a rights management company for music publishing and recording rights. It administers the rights to more than one million songs, including works by artists like Bruno Mars, Johnny Cash, and Will.i.am.
"We are happy to have BMG back with us entirely," Bertelsmann's Chief Executive Thomas Rabe said.
KKR roughly doubled its investment cashing in 350-400 million euros for its equity stake, the source close to the deal said. KKR initially invested 50 million euros in BMG in 2009 and later upped the investment to 209 million.
On an annualized basis, KKR's return - or so-called internal rate of return (IRR) - was above the 20 percent threshold private equity investors are seeking to book when buying and selling companies.
The BMG sale is KKR's second media divestment in roughly two weeks. In mid-February, KKR and peer Permira raised 485 million euros in a sale of shares in German broadcaster ProSiebenSat.1, the first step towards their complete exit from the media group.
Bertelsmann's Rabe said in September he planned major acquisitions and strategic partnerships to accelerate growth in coming years in a bid to become more international and a leading digital company.
Music rights companies as well as educational and scientific book groups are among potential targets, Bertelsmann has said. The group is also seen as a possible buyer for German speciality publisher Springer Science+Business Media, owned by private equity firms EQT and GIC.
Bertelsmann is planning to pay for its acquisition spree by selling shares in broadcasting group RTL Group.
($1 = 0.7649 euros)
(Reporting by Ludwig Burger, Alexander Hübner and Nikola Rotscheroth; writing by Arno Schuetze; Editing by Mark Potter)