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Bertelsmann to Acquire CDNOW

[London, ENGLAND] European media giant Bertelsmann announced Thursday an agreement to acquire online music destination CDNOW for $117 million in cash.

A pioneer in selling CDs and videos online, CDNOW was one of the major Internet sites constantly reported to be running short of finance in recent weeks. Under the ownership of Bertelsmann that problem is now solved.

Bertelsmann will advance financing of around $42 million to pay off CDNOW's existing loans and to fund its operations until the transaction is complete.

CDNOW will retain its branding while becoming Bertelsmann's main outlet for all its music commerce online. As a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) it will have access to the content of GetMusic, the joint venture between Bertelsmann's BMG Entertainment and Universal Music Group.

With an average daily audience of 0.7 million people, 4 million customers, half a million products and 0.65 million sound samples online, CDNOW brings a massive expansion to Bertelsmann's e-commerce capabilities at a relatively low cost.

Klaus Eierhoff, the Bertelsmann Board member responsible for multimedia businesses, said that the acquisition was another step in a strategy to make Bertelsmann the world's leading e-content, community and commerce company.

"With its strength in traditional e-commerce and music content as well as leading technologies such as digital downloading and custom compilations, CDNOW is a pioneer in its field and an excellent fit with our online and offline music assets," said Eierhoff.

Jason Olim, president, chief executive and co-founder of CDNOW appeared reasonably satisfied with the deal, saying that it was a successful conclusion to an extensive search for a merger partner.

"We believe our combination with Bertelsmann is the best outcome for our shareholders, employees and customers," said Olim.

CDNOW's management team is likely to remain with the company, with Jason Olim now reporting to Bertelsmann's President and Chief Executive Andreas Schmidt.

In a statement about the acquisition, Schmidt drew attention to Bertelsmann's recent strategic alliances with AOL and Terra Lycos and spoke of how e-content, community and commerce were bringing the benefits of "enhanced convenience, wider selection, and competitive pricing" to consumers everywhere.

"As part of the Bertelsmann family of digital businesses, we are confident that CDNOW will be an important part of this revolution," said Schmidt.

The parties to the merger agreement expect to complete the transaction during the fall of this year.