[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.
