Bertelsmann trimming Britney offer

MEDIA giant Bertelsmann is trying to cut the $3bn (£1.9bn) it was expected to pay for Britney Spears' record label, Zomba, to build up its war chest for a possible bid for ITV.

Under a deal struck in 1996, Zomba chief executive and founder Clive Calder has forced Bertelsmann to pay for the remaining 75% of the independent London-based label, which boasts top-selling artists such as Britney Spears, NSync, Steps, and Shanks & Bigfoot.

It is understood that senior Bertelsmann executives are planning to offer just $700m to Calder, but allow the existing management to stay in control. In return, Bertelsmann would be released from the full payment due under the deal.

An executive close to the German company said: 'The agreement limits Bertelsmann's freedom. It needs its cash for expansion and it sees ITV as a prime piece of the jigsaw.'

Bertelsmann benefited from a similar deal of its own this year when it forced AOL Time Warner to buy its stake in loss-making AOL Europe for $6.75bn.

Bertelsmann's main television business in Europe is RTL, which owns 65% of Channel 5. RTL chief executive Didier Bellens has often insisted that RTL is not interested in selling out of Channel 5. But he would have to do so to acquire more television assets in Britain.

Despite Bellens' comments, Bertelsmann chief Thomas Middelhoff is known to be keen to expand in the UK television market and is understood to be looking at ITV. He would probably wait until Carlton and Granada had merged. They tried to do so in February and are expected to finalise a deal in the coming months.

Middelhoff considered acquiring Carlton last year, but decided not to go ahead.

Bertelsmann's disentanglement from a joint venture with AOL Time Warner last year was a smart move. And with AOL Time Warner now facing boardroom crises, it looks even better. In a deal struck before the dotcom bubble burst, AOL agreed to pay $6.75b - almost three times its market value - in cash to Bertelsmann for its half of internet service provider AOL Europe.

With executives from Time Warner's traditional media and entertainment businesses now in ascendancy at AOL, the future of AOL Europe looks uncertain. Losses last year topped £385m on sales of just £513m and AOL UK recently put up its internet access charges. An AOL spokesman said: 'It is business as usual with AOL Europe. It is one of our more mature international operations and it is a great success. The changes will have no impact.'

The group's chief operating officer Bob Pittman left last week and cashed in £47m of shares.