Private Equity Deals & Transactions

KKR to exit BMG

The firm, which acquired the music rights management company in 2009, has sold its stake to media conglomerate and co-owner Bertelsmann.

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US-based Kohlberg Kravis Roberts has sold its majority stake in music company BMG to Bertelsmann, the German media conglomerate.

The value of the transaction was not disclosed, but a source close to the matters suggested it could be situated between €700 and €800 million. The deal will bring a return for KKR located within the 1.5x – 2.0x range, the source said.

Created in 2008, BMG covers rights administration, development, and exploitation for artists and songwriters. It operates in eight music markets and manages rights of more than a million songs and recordings, including works by artists such as Bruno Mars, Duran Duran, Gossip, Johnny Cash and Will.i.am.

KKR first invested in the company in July 2009, through a partnership with Bertelsmann that saw it acquire 51 percent of the group. Bertelsmann, a media group comprising television, publishing, servicing and printing businesses, owned the remaining 49 percent.

Both partners then led BMG on a strategy based on buy-and build and organic growth, Johannes Huth, head of KKR Europe, said in a statement. “We explored new business approaches with Bertelsmann; BMG did pioneering work in the music rights market with its digital, service-focused business approach. The model of a ‘growth and build’ partnership between a corporate group and KKR is bound to be seen more often in the future.”

The company bought seven catalogues between 2009 and 2013, whilst also registering 10 percent organic growth, according to a source. It is now the fourth largest music rights management company worldwide.

BMG is the first exit made by KKR’s European Fund III, which closed on $6.79 billion in 2008. The firm is now in the market to raise its latest North American and Asian funds, which have respectively garnered $7.5 billion and $5 billion in commitments, according to Private Equity International’s Research and Analytics division.

Both vehicles, which have respective targets of $10 billion and $5.75 billion, are expected to reach a final close before the end of the year.