updated 5/25/2006 8:01:02 AM ET 2006-05-25T12:01:02

Bertelsmann AG, the German media company that owns Random House, said Thursday it would buy back a Belgian holding company’s 25.1-percent stake for 4.5 billion euros ($5.8 billion) in a move that frees the company from the prospect of an initial public offering.

Bertelsmann earlier this week had raised the possibility of buying out Groupe Bruxelles Lambert, sidestepping GBL’s plan to sell the shares on the stock market. In a statement Thursday, it said the buyback would be effective July 1.

The buyback will be financed with a bridge loan from several banks — a “significant part” of which will be paid back over the next 12 to 18 months, partly with proceeds from the divestment of BMG Music Publishing, a Bertelsmann statement said.

Bertelsmann said it will invite selected bidders to participate in an auction process for BMG Music Publishing, starting in June.

Chief Executive Gunter Thielen said Bertelsmann managers and the majority shareholders — the Mohn family — “are convinced that the share buyback is the best option to secure the continuity and the successful development of the company on the basis of our corporate culture of partnership.”

Guetersloh, Germany-based Bertelsmann is Europe’s biggest media company and owns Random House, the world’s largest publishing house, magazine publisher Gruner + Jahr as well as broadcaster RTL. It also operates Sony BMG, a music joint venture with Sony Corp.

The company, which earlier this month posted a 55 percent jump in first-quarter net profit, said Monday it is fit for the stock market.

However, German media had speculated that the Mohn family, which controls Bertelsmann directly and through a foundation and exercises close control of its management, wanted to avoid putting its shares on the stock market.

The buyback “guarantees the independence of the company,” family representative Liz Mohn said. “It secures the greatest possible freedom for the executive board to manage the business.”

CEO Thielen noted that Bertelsmann is on track for record results this year. Given that and expected progress in the coming years, he said “the purchase price agreed with GBL is reasonable.” He said Bertelsmann “will maintain full strategic flexibility to further develop its businesses.”

Thursday’s agreement is subject to approval by the companies’ boards.

GBL acquired its Bertelsmann stake in 2001 in exchange for its 29.9 percent share in broadcaster RTL.

GBL said in January that it intended to activate a clause in an agreement with the Mohn family allowing it to sell its shares in an IPO. It was entitled to formally request an IPO as of Tuesday.

It has said it wanted to sell because it was more comfortable with industrial than high-tech holdings.

Thielen’s predecessor as CEO, Thomas Middelhoff, reportedly clashed with the Mohns over the company’s direction and over his proposal that they sell part of their stake in addition to the shares held by GBL. Middelhoff left in 2002.

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