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Bertelsmann Forms a Takeover Fund: WSJ

German media conglomerate Bertelsmann is entering the private equity world by joining with Citigroup and Morgan Stanley to create a 1 billion euro ($1.33 billion) fund for leveraged acquisitions in the media sector, the Wall Street Journal reported Thursday.

This is a big move for Bertelsmann, a company that has remained in family hands since 1835 and followed a more conservative growth strategy for the last few years, the Journal said.

The shift also highlights the increasing spread of private equity across corporate Europe.

It also emphasizes a shortage of acquisitive ability at Europe’s largest media group by sales, the Journal stated. Although the company reported a record profit Wednesday, it has been hemmed in financially since the previous year, when debts rose after it 4.5 billion euros ($6 billion) to buy out a minority investor.

Bertelsmann told the Wall Street Journal that it will contribute 500 euros ($668 million) to the pooled investment fund over the next three or four years, with Citigroup Private Equity and Morgan Stanley Principal Investments each contributing 250 million euros ($334.2 million).

According to the Journal, the fund plans to take minority stakes of 20% to 30% in media companies acquired with the aid of other private-equity groups. It also plans to further leverage its investments by funding most of the takeovers with debt.

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