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. Last Updated: 07/27/2016

Bertelsmann's Chief Axed by Old Guard

FRANKFURT, Germany -- Bertelsmann chief executive Thomas Middelhoff was forced to step down Sunday after a fierce dispute over his strategy, joining the growing ranks of media chiefs ousted by a more conservative old guard.

Germany's privately owned Bertelsmann, home to music company BMG and publisher Random House, said it was replacing Middelhoff with its media services head Gunter Thielen -- a long-serving Bertelsmann executive seen as a safe pair of hands.

High-flyer Middelhoff had long battled with Bertelsmann's old guard as he went on a crusade to modernize and take the secretive newspaper and book publisher public in a bid to challenge the likes of AOL Time Warner and Disney.

His surprise exit immediately sparked rumors that the 49-year-old German might become the new chief executive of Deutsche Telekom after the ouster of Ron Sommer earlier this month.

However, sources close to the company said it was too soon to say what Middelhoff would do next. A spokesman for Deutsche Telekom declined to comment, saying: "We will not get involved in speculation."

Bertelsmann's conservatively minded shareholders had grown increasingly concerned about Middelhoff's adventurous nature and grand plans for a flotation as the media industry grapples with tumbling advertising revenues.

It remains unclear what future the flotation has now.

Middelhoff's departure came as a shock to the media industry as it reels from the ouster of two other high-profile media chiefs this month -- Vivendi Universal chief executive Jean-Marie Messier and AOL Time Warner chief operating officer Robert Pittman.

"The reasons for the departure were differences in views between the chief executive and the supervisory board over the future strategy of Bertelsmann AG and over cooperation between the supervisory board and management," Bertelsmann said in a statement, without giving further details.

Taking the helm of the fusty German giant four years ago, Middelhoff engaged in a frenzy of deals to create the world's fifth-largest media group.

But the company, based in the isolated German town of Gutersloh, remained highly conservative at heart and its owners grew nervous at the scrutiny a public listing would bring.

However, Bertelsmann said the new management team -- which also saw the appointment of chief financial officer Siegfried Luther as deputy CEO -- "stood for continuity in the further global development of the company."

The drive to list Bertelsmann had been a key part of Middelhoff's long-term strategic vision, but it took some effort to win over Rheinhard Mohn, the 80-year-old philanthropist who essentially controls the company as head of the main shareholder, the Bertelsmann Foundation.

Last year, Bertelsmann opened the way for a flotation by swapping 25 percent of its shares with Belgian investment house Groupe Bruxelles Lambert for a stake giving it control of RTL.

GBL has the right to sell the stake in a stock market listing by the middle of the decade, a move seen as a stepping stone to the market for Bertelsmann.

With shares in listed media companies worldwide slumping under the impact of market uncertainty and flagging advertising revenues, no move is expected at the moment, however.

While Bertelsmann has been hit hard by the advertising slump -- especially its pan-European broadcaster RTL Group -- analysts had noted it was difficult to ascertain how bad things really were at the German group.

Gerd Schulte-Hillen, chief of Bertelsmann's supervisory board, had been particularly concerned about Middelhoff's grand plans and convinced the group's controlling shareholders, the Mohn family, that they needed a safe pair of hands at the helm.

Middelhoff's replacement, 60-year-old Thielen, is seen as just that, having served with Bertelsmann for more than 20 years. Until now he was running the Arvato division of the group, which was founded as a 19th-century hymn book publisher.