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"Our aim is to achieve a return on sales of at least 10% in the next three years. Bertelsmann from today is preparing for a possible flotation."
——Thomas Middelhoff

BERTIE EYEING IPO POSSIBILITIES

In Case Of Financial Crash, New Stock Can Be Used As Flotation Device
Following reports of mounting losses, Bertelsmann is planning a cost-cutting program and a series of disposals as it prepares for flotation.

In an internal memo calling for a cultural "revolution," Bertie top dog Thomas Middelhoff, told staffers he is aiming to improve margins in the clearest signal yet that he is preparing the privately owned group for life as a publicly-listed company, London’s Financial Times reports.

"Our aim is to achieve a return on sales of at least 10% in the next three years," Middelhoff wrote. "Bertelsmann from today is preparing for a possible flotation."

Middelhoff's call to improve profitability comes amid growing scrutiny of his company’s financial performance. Several parts of the business have fallen into loss, notably BMG. The book clubs business, which for years was the financial mainstay of Bertelsmann, has been in decline for years and is already in the process of a restructuring.

In addition, the paper says several of Middelhoff's new media investments have yet to show a return.

According to the Financial Times, Middelhoff's ambitions to revolutionize Bertelsmann have been made possible because the company's modern founder, Reinhard Mohn, has come to embrace the idea of a new direction for the group, the memo said.

Ahead of any IPO, Middelhoff is understood to be looking to "clean up" the portfolio of Bertelsmann assets, selling out of non-core operations, loss-making companies and minority holdings, the paper asserts. The streamlining is part of an effort to make the company more "capital markets-oriented," according to the memo seen by FT Deutschland.

As part of the cost-cutting drive, Bertelsmann E-Commerce Group, which coordinates the company's Internet activities, has already decided to close its Hamburg office. The German group will also drastically scale back its plans for Internet investments.

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