DirectGroup Bertelsmann to Acquire Largest Specialized Retailer of DVDs in the U.S.

DirectGroup Bertelsmann to Acquire Largest Specialized Retailer of DVDs in the U.S.

GÜTERSLOH, Germany and NEW YORK, May 10/PRNewswire/ --

- Acquisition of The Columbia House Company Confirms Growth Strategy

The U.S. music club BMG Direct, a subsidiary of DirectGroup Bertelsmann, has reached an agreement with the Blackstone Group to acquire The Columbia House Company. Terms of the deal were not disclosed. The transaction is subject to certain government approvals and other customary conditions.

Columbia House is the largest specialized retailer of DVDs in the U.S. The company reports that it currently has well over eight million regular customers and offers the DVDs of movies from most of the major Hollywood studios. BMG Direct is the largest direct to consumer distributor of recorded music in the U.S.

The transaction brings together two powerful brands with complementary structures and business models. The combined expertise of these two direct marketing companies will create broader product offerings for their members. Stuart Goldfarb, President and CEO of BMG Direct, will serve as President and CEO of the newly acquired company.

Ewald Walgenbach, CEO of DirectGroup Bertelsmann said, "The acquisition of Columbia House is a major milestone in DirectGroup's growth course. This move gives us strategic access to the growing business with DVDs, as well as broadening our customer base in the U.S. market. In bringing together BMG Direct and Columbia House, we are combining two profitable businesses."

BMG Direct CEO Stuart Goldfarb said: "These two great brands share a common focus on their customers, their employees and their products. Columbia House is one of the market leaders in the DVD business; this transaction provides great opportunities for us and for our customers, who will be able to access a broad selection of music and DVD titles with the same level of customer satisfaction they've come to know and expect."

BMG Direct has longstanding relationships with its members and reaches customers personally with targeted offers tailored to their music preferences. The company mails over 68 million catalogues to customers each year and operates a website (www.bmgmusic.com) which serves millions of customers online.

About DirectGroup Bertelsmann:

DirectGroup Bertelsmann integrates Bertelsmann's global media direct-to-customer businesses. Roughly 32 million customer relationships secure DirectGroup's position among the largest enterprises in media commerce. The cornerstone of this success are the book and music clubs in 22 countries incorporating strong brands like France Loisirs, Book-of-the-Month, Der Club, Circulo de Lectores and BMG Music Service. Members have access to the clubs' product range via catalogs, internet or one of the more than 600 worldwide club shops. Since August 2002, Ewald Walgenbach has headed the unit. DirectGroup Bertelsmann is a division of German-based Bertelsmann AG. In fiscal year 2004, DirectGroup made 2.2 billion euros in revenues with more than 12,000 employees.

About BMG Direct:

Based in New York City, BMG Music Service and online music retailer CDNow form BMG Direct which is a unit of DirectGroup Bertelsmann. BMG Music Service is one of the world's largest direct-to-customer retailers of music. In addition to the BMG Music Service brand, the company operates four different specialty clubs - the BMG Classical Music Club, the BMG Jazz Club, Sound & Spirit (Christian and Gospel music), and Ritmo y Pasion (Latin music) - and offers a wide variety of listening choices including pop, rock, R&B, adult alternative, easy listening, jazz, blues, classical, Latin, hip-hop, country, Christian and many more. Customers are offered a selection of over 14,000 titles provided by the four major music groups and over 100 independent record labels and can shop for music directly from catalogues or online at www.bmgmusic.com.

About The Columbia House Company:

The Columbia House Company is the world's largest direct marketer of music, videos and DVD home entertainment products. With approximately 8 million offline and online club members in the United States and Canada, the company provides direct-to-consumer marketing of over 8,700 DVD titles and 8,000 music titles through its entertainment clubs. The company's Website, www.columbiahouse.com, is one of the premier e-commerce brands and consistently ranks among the Web's top 25 shopping destinations. Since its inception in 1955, Columbia House Company has a proven record of excellence in database marketing, market segmentation, credit screening and niche market merchandising. Headquartered in New York City, The Columbia House Company is a general partnership, indirectly owned by The Blackstone Group, the New York based private investment bank.

About The Blackstone Group

The Blackstone Group, a private investment and advisory firm with offices in New York, Atlanta, Boston, London, Hamburg, and Paris, was founded in 1985. The Firm has raised a total of approximately US$32 billion for alternative asset investing since its formation. The Blackstone Group's six core businesses are Private Equity Investing, Private Real Estate Investing, Corporate Debt Investing, Marketable Alternative Asset Management, Corporate Advisory, and Restructuring and Reorganization Advisory. www.blackstone.com

Contact

Gerd Koslowski, Vice President, Corporate Communications, DirectGroup Bertelsmann, gerd.koslowski@bertelsmann.de;

Carl-Bertelsmann-Str. 270, 33311 Gütersloh - Germany, Phone +49-(0)-52-41-80-41-555, Fax +49-(0)-52-41-80-41-840, www.directgroup-bertelsmann.de;

Paula Batson, BMG Direct, Phone +1-212-930-4531, paula.batson@bmgdirect.com

Source: DirectGroup Bertelsmann

Contact: Gerd Koslowski, Vice President, Corporate Communications, DirectGroup Bertelsmann, gerd.koslowski@bertelsmann.de; Carl-Bertelsmann-Str. 270, 33311 Gütersloh · Germany, Phone +49-(0)-52-41-80-41-555, Fax +49-(0)-52-41-80-41-840, www.directgroup-bertelsmann.de; Paula Batson, BMG Direct, Phone +1-212-930-4531, paula.batson@bmgdirect.com

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