Blackstone Acquires Majority Interest in The Columbia House Company

Blackstone Capital Partners III LP, an affiliate of The Blackstone
Group, the New York-based private investment bank, announced last week that it has reached a
definitive agreement with AOL Time Warner Inc.‘s Warner Music Group and Sony Corporation’s
Sony Music Entertainment Inc. to acquire a majority interest in The Columbia House Company.
Both Sony and Warner Music Group will retain minority interests in The Columbia House
Company, the world’s largest direct marketer of music, videos and DVD home entertainment
products. In addition, Sony and AOL Time Warner will remain important suppliers of music and
video content to The Columbia House Company. The terms of the transaction were not disclosed.
Howard A. Lipson, Senior Managing Director of The Blackstone Group said, “This is an exciting
opportunity for us to invest behind a first-class management team and a strong brand name. We
look forward to working with Columbia House, and with two of our longest-standing corporate
partners, Sony and AOL Time Warner, in this transaction.”
Scott Flanders, Chairman and CEO of The Columbia House Company said, “This transaction is a
tremendous opportunity for our investors and our management team as we capitalize on the
explosive growth of the market for DVDs. It is also a unique opportunity for all of us at Columbia
House to work with a first-rate financial partner in Blackstone, while continuing what has been a
productive partnership with Sony and AOL Time Warner.”
Financing for the transaction, which is expected to close in June subject to certain government
approvals and other customary conditions, is being arranged by UBS Warburg LLC and Banc of
America Securities LLC. Blackstone was advised by UBS Warburg and Pathway Ventures.
The Blackstone Group, a private investment bank with offices in New York and London, was
founded in 1985. The firm has raised a total of approximately $23 billion for alternative asset
investing since its formation, $14 billion of which has been for private equity investing. The
Blackstone Group’s six core businesses are Mergers and Acquisitions Advisory, Restructuring and
Reorganization Advisory, Private Equity Investing, Private Real Estate Investing, Private
Mezzanine Investing, and Liquid Alternative Asset Management.
The Columbia House Company is the world’s largest direct marketer of music, videos and DVD
home entertainment products. With more than 16 million offline and online club members in the
United States, Canada and Mexico, the company provides direct-to-consumer marketing of more
than 12,000 music titles and 7,000 video and DVD titles through its entertainment clubs. The
company’s Web site, is one of the premier e-commerce brands and consistently ranks among the Web’s top 25 shopping destinations. Since its inception in 1955, The
Columbia House Company has a proven record of excellence in database marketing, market
segmentation, credit screening, and niche market merchandising.