Shareholder Files Suit Against KKR as PRM Stock Inches Up
By Matt Kinsman
A lawsuit filed this week against Primedia majority owner and leveraged buyout firm Kohlberg Kravis Roberts & Co. by a Primedia shareholder will probably be an uphill battle for the plaintiff but raises the prospect of dollars returning to the publishing company.
On Tuesday, Primedia shareholder Linda Parnes Kahn filed suit in Delaware’s Court of Chancery, claiming KKR breached fiduciary duties to look for common shareholders and redeemed preferred stock early at a premium. The complaint says KKR, which owns 60 percent of Primedia, made $200 million more than it paid for its preferred stake in Primedia, much of it through the sale of Primedia properties such as Seventeen magazine, American Baby and New York magazine.
Defendants in the suit include former Primedia CEO Kelly Conlin, KKR founding partner Henry Kravis and Primedia’s directors.
The value of Primedia stock has fallen by half since October when the company announced the departure of Conlin and a plan to split into two publicly traded companies: the Consumer Guides unit and Enthusiast and Education unit. Primedia also revised its year-end EBITDA forecast downward from flat or slightly down to a decline in the high single to low double-digit percentage range, a swing that could go as high as $20 million.
A small flurry of activity took Primedia’s stock price back up over $2 per share this week.
Products Still in Play
Despite Primedia denials that it is exploring further liquidation, informed observers say the company is still looking to sell off pieces and has retained Goldman Sachs as part of an effort sell its 11-title crafts magazine group.
Primedia reported revenue of $798 million through the first nine months of 2005, up two percent from the same period in 2004. The Enthusiast unit generated $513.9 million, down 1.5 percent, while the Consumer Guides unit was up 10.4 percent to $236.4 million and Education was up 2.8 percent to $48.2 million.
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