Time Selling Magazines Out of Necessity, Not Market Conditions
By Bill Mickey and Marrecca Fiore 09/14/2006
Publisher could fetch between $300 million and $400 million for Time4Media titles.
Although the market is prime for publishing transactions, Time Inc.'s announcement this week that it would sell 18 of its enthusiast titles was driven out of a need to better focus its publishing holdings and for its parent company, TimeWarner to improve its profit margins, said those with knowledge of both the company and the industry this week.
"To me, it makes a lot of sense," said Reed Phillips, managing partner of investment banking firm, DeSilva & Phillips. "There's been an internal struggle from the time they did the parenting deal, which dates back probably 15 to 20 years ago, as to whether (Time) can be both a mass market publisher of magazines and a special interest publisher. It's a debate that's never really gone away."
Earlier this week, Time CEO Anne Moore broke the news to her employees in a memo that the company would sell its Parent Group and Time4Media divisions, which include Parenting and Baby Talk magazines, as well as Ski Magazine, Field & Stream, Outdoor Life, the Transworld publications, as well as Popular Science. "This is a landmark transaction," Phillips said. "This is the sale that comes around every 10 years in the industry. And I'm sure it wasn't an easy decision. This is not driven by market conditions, this is driven by pressure on the company to improve margins and appear more strategic."
The titles are being brokered by J.P. Morgan and interested buyers should contact either J.P. Morgan or Maurice Edlson at Time, according to Time spokeswoman Dawn Bridges.
Time Warner purchased the division, formerly the Times Mirror magazines, from Tribune in 2000 for $475 million. "It's really tough to run both general interest magazines and special interest magazines under the same roof, they are quite different skill sets and orientations. It was a great experiment. In the end, it's a wise thing to separate the two," said former Times Mirror CEO Effrem "Skip" Zimbalist, who is currently the CEO of Active Interest Media and considered by some to be a potential bidder on the Time offering. Phillips said he believes the titles will sell for between $300 million and $400 million.
While Phillips expects that strategics such as Conde Nast, Hearst and Meredith will probably be interested in Time's Parenting Group, both he and Zimbalist believe the Time4 group will most likely appeal to private equity firms and enthusiast magazine publishers, such as Active Interest Media.
Zimbalist didn't admit to an interest in the publications, but he did explain why they would be attractive to private equity firms. "If you look at most of the magazines they are number one or number two in their special interest area - they're very strong magazines in their fields," he said. "I think Time Inc. has a very strong circulation department and they've done a good job in building and maintaining the circ front." Zimbalist added that the Internet, television and event offerings that have been built around the titles also make them attractive.
A company that does readily admit to an interest in both the Parenting and Time4 groups is Carlson Business Media, an interactive b-to-b and b-to-c company founded in 2000, said company president and CEO Martin Carlson Thursday. "We have been searching for some media properties to buy since before 9-11-2001, but have found nothing that has survived our due diligence," he said. "We're looking at consumer, business print and interactive titles, but if the numbers don't make sense, we can't move forward on them."
Carlson said the titles have strong brand recognition and that his company would like to take a better look at their margins and market share before deciding whether to make a bid. Although some of the better-known magazine companies like Hearst and Conde Nast might make play for the Time properties, Carlson says he's not concerned. "We have the money to pull it off," he said. "They might have more friends. But we have other irons in the fire, as well."
The Time4 Media businesses for sale include:
Popular Science
Marine Group (Yachting, MotorBoating and SaltWater Sportsman)
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