Sources: ‘Black Book’ For Time Inc. Titles on the Block Shows Declining Revenue, EBITDA
First bids due next week for Parenting Group and Time4Media Group magazines being sold.
Initial interest in the upcoming divestment of Time Inc.’s Time4Media and Parenting groups is strong, M&A analysts said this week, though they also described the groups as slumping and likely to finish the year down significantly from the prior year.
As many as 90 copies of the offering memorandum were circulated, according to sources familiar with the process. First-round bids are due Wednesday.
"It’s a high-profile sale, so you’re going to get a lot more people interested in taking a look at these titles than you normally would," said Reed Phillips, managing partner of the investment media banking firm DeSilva & Phillips. "But some will drop off."
The bidders will likely include Bonnier AB, the $2.7 billion Swedish media giant that acquired a stake in World Publications earlier this year, one industry source speculated. They may also include Aspire Media and its private-equity backers, Apprise Media and its private-equity backer, and one possible surprise: An M&A source speculated that American Media, the troubled publisher of Star, National Enquirer and other magazines, may attempt an acquisition and a quick flip of the property to generate cash. "It’s a dark horse," the source said.
With so many books in circulation, word naturally gets around, and industry buzz is that both the Parenting Group and the Time4Media groups;which comprise 18 magazines;will have substantial drops on both the top and bottom lines for 2006. The Parenting Group, according to sources, will generate revenue of nearly $90 million in 2006, but that number represents a decline by a percentage in "the high teens" from 2005. The group was up in 2004, flat in 2005, and then "dropped like a rock," one source said. The bottom line, not including Time Inc. corporate overhead, was below 15 percent and down by about half, according to the source.
On the Time4Media side;which includes the old Times Mirror magazines plus the TransWorld action sports magazines;revenue for 2006 will be about $175 million and will decline in "the mid-single digits from 2004," according to a source. "It is a pretty steady trend," the source added. The margin, not including Time Inc. overhead, is less than 15 percent, but more than 10 percent.
Ad revenue down
Publicly available data on advertising also indicates a decline. According to Publishers Information Bureau reports, 12 of the magazines being sold have declined in ad revenue through September. The decliners are led by Transworld Snowboarding, which declined by 21.8 percent.
One source described the initial question of a potential bidder: Why do they want to sell? And the natural response, the source said, is about the fit. Time Inc. is a producer of mass-consumer, often weekly, magazines. These groups are to some extent orphans.
"The question here is how much of this deterioration of the business is because of the secular change going on in magazine publishing, with the shift to e-media, and how much has to do with the nature and the culture of Time Inc.’s management of these assets," a second source said. "The underlying value of what these businesses will command will revolve around an accurate answer to that question."
Time4Media President Hopeful
Time4Media President Tom Beusse, hired in January of this year, has spent the past 10 months expanding his division’s digital offerings, but could be out of job once the sale goes through. Beusse told Folio: Alert that the amount of interest is encouraging. "It’s just incredible," he said. "It’s like a freight train really. And there are a lot of great people that are interested in them. I just hope I can work for one of them."
January to September 2006 PIB revenue (in millions) and percent increase/decrease over previous year
Golf Magazine-$131, -2.2
Field and Stream-$50, -10.9
Outdoor Life-$19.8, -7.1
Popular Science-$50.6, -12.7
Ride BMX-$4.9, -4.8
This Old House-$36.8, -14.8
Transworld Skateboarding-$22.8, -9.0
Transworld Snowboarding-$10.4, -21.8
Transworld Surf-$8.6, +11.2
Salt Water Sportsman-$21.5, -5.4
Transworld Motocross-$10, +84.1
Babytalk – $50.6, 0.8
Parenting – $119.8, -11.2
Source: Publishers Information Bureau