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January 29, 2006 5:16 pm

Frère faces a dynastic fighter at Bertelsmann

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When the 83-year-old Rheinhard Mohn passed day-to-day oversight of Bertelsmann to his wife Liz, 63, in July 2004, the battle for control of Europe’s largest media company seemed won.

The couple at the head of the family that controls 75 per cent of Bertelsmann’s voting rights had spent four years fighting key executives, whom they feared were becoming too assertive.

The Mohns saw them all off. Mark Wössner, the supervisory board chairman, left in 2000 over differences with Mr Mohn. As chief executive before the technology boom, he had diversified the company’s business book publishing to TV.

Two years later, Thomas Middelhoff, chief executive, was sacked for his stock market visions, and in 2003 Gerd Schulte-Hillen quit as supervisory board head after an argument over the future of the music business.

All three senior executives had lost power struggles with fellow directors. But they had also come up against the growing influence of Ms Mohn, keen to protect the fortune of her aging husband.

“Liz Mohn is a street fighter,” says one Bertelsmann insider. “Her origins are humble and she’s not going to let anyone steal the inheritance of her family.”

Given this track record, Ms Mohn is expected to do her utmost to stop plans by Albert Frère, the Belgian investor who controls 25 per cent of Bertelsmann, to sell his stake to the public in 2007.

Five years ago, Mr Middelhoff gave Mr Frère the option to sell after May 2006 when Groupe Bruxelles Lambert, his investment vehicle, ceded a 30 per cent stake in TV company RTL in return for the Bertelsmann shares.

Bertelsmann‘s official position now is that it is “prepared” for a float.

After all, one former executive says, Bertelsmann is nearly as transparent as listed counterparts – and Mr Frère holds only 25 per cent of the voting rights, so even new shareholders could not veto what the Mohns decide.

“But for Liz Mohn it’s a dynastic question,” says the former executive. “She doesn’t want outsiders peering in because she fears for her children’s careers. That’s the battle for Bertelsmann of these last years.”

Two of the three Mohn children – Brigitte, born in 1963, and Christoph, born in 1965 – joined the eight–strong group that controls the family stake in 2000. In alliance with their mother, head of the group since 2002, they can veto any decision.

Liz married Mr Mohn in 1982 after a 24-year romance with the executive, whom she met while working for Bertlesmann. The couple had three children altogether – Brigitte, Christoph and Andreas, born in 1968 – but Mr Mohn continued to live with his first wife and their children while Liz married Joachim Scholz, a Bertelsmann book editor.

Liz divorced in 1978 but it was not until 1982 that Mr Mohn’s first marriage ended and he and Liz married. Their three children also took the Mohn surname.

As Mr Mohn’s health started to wane after 1999, he began to entrust his wife with responsibilities at the group.

Even her critics praise the late starter for her achievements since then. Bertelsmann has not reached its self-imposed target of 10 per cent return on sales, but her stern stewardship may have spared it from the worst of post-tech bubble trauma.

Under Gunter Thielen, the man Ms Mohn chose to succeed Mr Middelhoff, the company has retrenched and profits are looking up.

One banker reckons the company’s value has risen by a quarter to between €20bn and €24bn ($24bn-$29bn) in recent years.

But this success may now prove a burden. Bertelsmann’s balance sheet is tight, so Ms Mohn would need to borrow the best part of €5bn to €6bn to buy out Mr Frère and stop his plans to list.

“That could be difficult,” says one person familiar with the company. “Liz Mohn might yet accept the stock market listing. She knows you can’t shake off a shareholder like you can a top executive.”

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