Blackstone exits Columbia House

The Blackstone Group sold CD and DVD direct retailer Columbia House to media company Bertelsmann for $400m.

New York-based private equity firm The Blackstone Group is reportedly making a small profit on its sale of direct marketing music and movie company Columbia House to German media conglomerate Bertelsmann. The terms of the deal were not disclosed, but the sale is reportedly for $400 million (€311 million).

The combined BMG Direct and Columbia House entity will offer a broader selection of products to a larger customer base, while at the same time creating cost efficiencies.

Ewald Walgenback,
chief executive officer,
DirectGroup Bertelsmann

Blackstone bought a majority stake in the firm in 2002 for $410 million from Sony and Time Warner. Blackstone owned 85 percent of Columbia House, with Sony and Time Warner each holding 7.5 percent stakes.

Bertelsman, which is the fourth largest media conglomerate in the world, plans to fold Columbia House into its own BMG Direct club retailer. The former arch-rivals have a similarly sized customer base, but Columbia House has a more developed DVD sales program.

Sony and Time Warner had reportedly talked to Bertelsmann about a merger of the two direct marketers at the time of the sale to Blackstone.

Ewald Walgenback, the chief executive officer of DirectGroup Bertelsmann, which owns BMG, said the purchase was part of the company’s plans to expand their direct mail operations, a business Bertelsmann has been in since selling books door-to-door shortly after the Second World War.

“The combined BMG Direct and Columbia House entity will offer a broader selection of products to a larger customer base, while at the same time creating cost efficiencies,” he said in a statement. The new company will reportedly have around 16 million members in the US and Canada.

The Blackstone Group was founded in 1985 by Peter Peterson and Stephen Schwarzman. Since 1987, the firm’s private equity division has invested more than $14 billion over five funds.