Primedia Details Spin-Off, Makes Acquisition
Primedia detailed plans last week in a letter to its stockholders for the spin-off of its consumer guides division, but still has not yet pinpointed a date on which the spin-off will occur. A copy of the letter and its corresponding documents was filed January 11 with the Securities and Exchange Commission.
According to the filing:
- The new company will be called Consumer Source Inc. and will function as a stand-alone publicly traded company.
- Primedia’s shares will undergo a "10-for-1 reverse stock split" just prior to the spin-off. The reverse stock split will give Primedia shareholders one share for each 10 shares of the stock they hold. Such a split is used to drive up shareholder value. Following the spin-off, each shareholder will receive one share of Consumer Source stock for each share of Primedia stock they hold.
- Consumer Source Inc. will incur some $525 million in debt as a result of its separation from Primedia. Of the debt, $20.9 million will be used to repay debt that Consumer Source owes to Primedia. The remaining $504.1 million will be distributed to Primedia through a dividend, which Primedia will use to reduce its outstanding debt. Primedia was carrying about $1.37 billion in long-term debt as of the third quarter of last year.
- Primedia expects the spin-off to be tax-free and expects shareholder value to increase as the result of the spin-off.
- Consumer Source initially expects to experience a net loss following the spin-off due to the significant indebtedness it will incur.
- Primedia says it is spinning off the consumer guides division, which consists of free print and online guides serving the rental, automobile and other industries, because it is "fundamentally a different type of business than the company’s other businesses" in that it does not generate revenue from subscriptions and its products do not contain editorial content.
Instead of Selling, Primedia Makes an Acquistion
Primedia spent the better part of 2006 selling off pieces of its company. Among the divisions and products to go were its crafts groups, which went to Sandler Capital Management for $132 million; its gems group, which went to Interweave Press for an undisclosed price; and the hunting, fishing and shooting assets from its outdoors group to Intermedia Partners for $170 million.
This week, however, Primedia acquired Pro-Motion Motorsports, publisher of MiniMoto Magazine and the producer of EnduroCross and MiniMoto SX events. The terms of the deal were not disclosed.
The new publication and events will join Primedia’s enthusiast group’s other motorsport related publications, which include Dirt Rider, Mini Rider and ATV Rider magazines. Under the terms of the deal, Pro-Motion Motorsports co-founders, Eric Peronnard and Tim Clark will join Primedia’s management team, continuing to manage existing events and developing new events for the company.
Whether more buying or selling is in the company’s future is unknown. Primedia did not respond to requests for an interview.
Last month, the company said it planned to classify its education segment as a "discontinued operation in the fourth quarter" of 2006 while it explores strategic options for the assets of the segment. Industry sources have speculated that Primedia is looking to sell the segment.
Earlier this month, the company said it sold Colorado-based Climbing, a 40,000-circ publication published 10 times a year, to Skram Media of New York in December. The terms of the deal were not disclosed.