Bertelsmann makes €1bn provision for Zomba deal

Bertelsmann has admitted it would have to vastly overpay for its acquisition of the Zomba record label, by taking a €1bn (£640m) charge for the deal.

The contingency charge was included in the German media giant's interim results, released last night, even though the Zomba purchase has not yet been completed. Under a put option agreed in 1996 with the founder of Zomba, Clive Calder, which was exercised earlier this year, Bertelsmann agreed to buy the label for €3bn.

The company is now looking through Zomba's accounts in an attempt to beat down the price – which was calculated as a multiple of earnings. The provision was an admission that if the company does have to pay €3bn, it will be €1bn too much, insiders said.

The group also confirmed its retreat from standalone internet businesses under new chief executive Gunter Thielen. Thomas Middelhoff, ousted as chief executive in July, spent lavishly on building up Bertlesmann's internet activities.

Bertelsmann said it is looking for a buyer for its online book retailer, BOL, in the six countries in which it operates in Europe and China, and it had contacted Amazon.com and others about a deal. Separately, BOL in the UK has been turned into an online book club. Other internet operations will be integrated into allied offline company divisions. "We do not see the internet as a separate field of business, but as part of our core businesses, and mainly as a distribution channel," said Mr Thielen.

For the first six months of the calendar year, Bertelsmann made an operating profit of €157m, compared with a loss of €884m last year. Mr Thielen, who has stated that the company remains committed to an initial public offering in 2005, signaled that no more radical decisions should be expected from the company for some time. This is thought to rule out any interest in acquiring Britain's ITV.