Bertelsmann Offers to Buy Back Profit Participation Certificates

The generous offer is being made because Bertelsmann can no longer treat profit participation certificates as equity on its balance sheet due to changes in international accounting standards. The move is designed tooptimize Bertelsmann’s capital structure and reduce capital costs.

Profit certificates are instruments that give investors the right to participate in the net profit proceeds of a company. Unlike shares, profit participation certificates do not provide their holders with voting rights

at shareholder meetings.

Thomas Rabe, Chief Financial Officer at Bertelsmann, said: “The public purchase offer and the significant premium are supposed to ensure that the offer attracts the largest possible number of certificateholders. We address, in particular, those certificateholders who consider the premium offered by us as attractive based on the price performance of the past months. As many other companies, we exploit the current market environment in order to optimize our capital structure and reduce our capital costs. The profit participation certificate is an instrument that requires a lot of explanation to foreign investors and it is not accounted for as equity anymore. Of course, it will be at the choice of each investor whether or not to accept the offer but we consider the offer as attractive”.

The profit participation certificates issued in 2001 have not been used for the purpose of employee profit sharing since 2003. Since then, profit sharing at Bertelsmann is granted either in cash or through payments to a pension fund.

The offer will be funded from existing cash balances. Bertelsmann will continue to raise funds in the capital markets in the future. “We have been and will be a significant bond issuer in the media sector in Europe”, Rabe said.

All certificate buy-back offers will be reviewed and accepted by February 23 and the results announces soon thereafter, with a final settlement date of March 1, 2010.