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Meredith, Koch Brothers Buy Time Inc In $2.8 Billion Deal

Confirming rumors that had swirled over the past 10 days, on Sunday night Meredith Corp., publisher of Better Homes & Gardens, Martha Stewart Living and Family Circle announced it has agreed to acquire all of Time Inc's outstanding shares for $18.50/share or $1.85BN; including the assumption of Time's debt, the deal is valued at a total of $2.8 billion. Meredith has secured $3.55BN in debt financing from RBC Capital Markets, Credit Suisse, Barclays and Citigroup Global Markets, according to the FT.

More importantly, the acquisition is also backed with a $650 million preferred equity commitment from Koch Equity Development, the private equity firm of Charles and David Koch, giving the conservative billionaires a stake in one of America’s best-known publishers. That said, the Kochs will not have a seat on Merediths board and, the company said, “will have no influence on Meredith’s editorial or managerial operations”.

That remains to be seen, especially if Trump now develops aspirations toward Meredith's Man of the Year award. Needless to say, it is the Koch's takeover of Time that is giving the left nightmares:

This item about Koch having “no influence” over TIME should give you as much assurance as WSJ’s “editorial independence committee,” which caved to Murdoch just 4 months after the acquisition https://t.co/JUlSLktdih

— Bill Grueskin (@BGrueskin)

In any case, this is Meredith’s third run at 94-year-old Time according to the FT, which publishes Time, People and Sports Illustrated magazines. The deal has been approved by both companies’ boards and is expected to close in the first quarter of 2018.

As the WSJ reports, "the deal caps the end of an era."

Time, whose namesake Time magazine hit the newsstands in March 1923, emerged as one of the country’s great journalistic enterprises, shaping both the political and cultural landscapes. But in recent years, the magazine publisher lost ground as a shift among readers to digital platforms cut into traditional print revenue and a new generation of online rivals emerged.

Like most other legacy media outlets, Time has been trying to transform itself from a print to a digital media business in the face of successive years of declining revenues but has been shackled with a $1.2bn long-term debt burden. The $2.8bn deal value includes assumption of Time Inc’s debt.  The company has been making sweeping cost cuts, eliminating 300 jobs, cutting back the circulation and frequency of some of its best-known magazines, and attempting to sell its UK magazines division. Time Inc. has also been investing in online video and branded content and even a subscription services for pet owners, yet its print magazine circulation and advertising still account for about two-thirds of total revenue. In the first nine months of the year, magazine revenue dropped 17% to $1.3 billion. Time Inc. claims 30 million print subscribers, although that sounds like the fakest news yet. Time expects to generate about $1 billion this year in nonmagazine revenue.

Time has struggled to find a path to growth since its spinoff from Time Warner in 2014. The publisher’s shares lost more than a third of their value, even as Time has cut traditional jobs while adding digital staffers, reorganized its ad sales and scaled back the circulation and frequency of some titles. As the FT adds:

"Time Inc’s 3½-year run as a standalone publisher has been rocky. It has been hard hit by the erosion of print and has not recorded revenue growth over the past six years. A strategic reorganisation aimed at growing digital revenues and reaching a wider audience has shown some progress, but has been overshadowed by the woes of its traditional magazine business, where revenues have dropped 14 per cent from a year ago."

Time's new owner, Iowa-based Meredith, publishes monthly magazines aimed at women, including Better Homes & Gardens, Martha Stewart Living and Family Circle, and has long coveted Time titles such as People and InStyle. It has tried and failed to reach a deal twice before. In 2013, talks with Time Warner, which then owned Time Inc, fell apart and the publisher was spun off as an independent company.

Stephen Lacy, Meredith’s chairman and chief executive, said the combined company will be able to reach almost 200 million consumers across all platforms, including digital. “The vision is the absolute premiere media company in the country with premium branded content on every platform,” Mr. Lacy said in an interview. “We’re very excited to bring these businesses together.” Lacy said he has never met with the Koch brothers. “They won’t have a seat on the board of which I chair,” he added.

Meredith’s own magazine revenue has slipped slightly, but it has somewhat of a buffer thanks to its ownership of local television stations. For the fiscal year ended June 30, revenue at its magazine group fell 2% to $1.08 billion, while its TV station group saw revenue rise 15% to $630 million.

Few in the magazine industry have been spared the downturn in print and difficulties of building a sustainable digital business. Condé Nast, the owner of Vanity Fair and Vogue, is slashing budgets and staff; Vanity Fair’s new editor has been tasked with trimming its costs by 30 per cent. Rolling Stone, the iconic rock-and-roll magazine, is being sold by its founder.

As the WSJ concludes, for Time CEO Rich Battista, the sale may be bittersweet. Soon after he took the reins in September 2016, Time found itself the target of several interested buyers, and then a sale process dragged on for months with no deal. While Mr. Battista has emphasized the company’s digital efforts and ramped up the production of TV programming and video, he had relatively little time to shift Time toward a more robust digital future.

“As a publicly traded company, and one operating in such a dynamic industry as media, we know circumstances can change quickly,” Mr. Battista said in a memo to employees. “Meredith presented us with an opportunity to combine companies to create even greater scale and financial flexibility.”

Finally, in light of the animosity between the Koch's and Trump, the president can forget being Time man of the year for 2017 or as long as the billionaires are de facto in charge.