Meredith May Acquire Parents, Child, Fitness and Family Circle
Meredith is planning to acquire Parents, Child, Fitness and Family Circle magazines from Gruner + Jahr for $350 million provided all closing conditions are met.
The two companies currently anticipate signing definitive agreements early next month and are targeting a close by the end of June. G + J will have until June 30, 2005, an option to sell the assets of business publications Inc. and Fast Company to Meredith.
According to a press release, if Meredith does acquire the magazines, it plans to sell them through either a private sale or auction. Meredith does not believe the net impact of the purchase and subsequent sale of the business publications will be material to the overall purchase price.
“Parents, Child, Fitness and Family Circle are established and well-known consumer magazines that will benefit greatly from Meredith’s proven editorial, circulation, sales, database and brand-building expertise,” said Meredith Chairman and Chief Executive Officer William T. Kerr. “These titles have significant upside but have underperformed in recent years. We possess the unique skills and resources needed — particularly in the circulation area — to help these magazines realize their potential.”
Kerr said Meredith expects the transaction to generate EBITDA (earnings before interest, taxes, depreciation and amortization) in the low-to-mid $30 million range and be modestly accretive to earnings per share in fiscal 2006. Meredith plans to finance the acquisition through the expansion of existing credit facilities, resulting in a debt to EBITDA ratio of 2:1, leaving room to continue existing programs of share repurchases and dividend increases.
Meredith President and COO Stephen M. Lacy said the acquisition helps implement Meredith’s previously articulated corporate strategies, especially its initiative to attract younger women readers to Meredith magazines.
“Our acquisition of the American Baby Group in late 2002 helped us establish a foothold in this market,” said Lacy. “Now, with the addition of Parents, Child and Fitness, we will have added approximately 30 million female readers with a median age below 35 in just over two years. This establishes Meredith as the premier magazine company serving expecting and new families, who are leading purchasers of consumer products and services.
“Additionally, the acquisition adds to our growing presence in the Hispanic marketplace,” Lacy continued, noting that Parents’ Spanish-language title, Ser Padres, is an established title. “Combined with American Baby’s Hispanic titles, our custom marketing programs and the September 2005 launch of our new Spanish-language women’s title — Siempre Mujer! — Meredith is uniquely positioned to serve Hispanic consumers, the fastest-growing segment of the American population.”
Meredith Publishing Group President Jack Griffin said the company will use its industry-leading database and circulation practices to grow and strengthen its new additions. “We will employ our long-term direct-to-publisher strategy that emphasizes our editorial content and commitment to service journalism. Over the years, this has proven to be effective in generating highly profitable circulation for Meredith,” Griffin said.
Griffin added that Meredith plans to continue operating the titles in New York City, and the company’s recent successful integration of American Baby into its publishing portfolio will facilitate the transition process.
The transaction is subject to regulatory approval, according to John Zieser, Meredith’s General Counsel and Vice President of Corporate Development. “While integrating these titles is an immediate priority, we will continue to look for strategic opportunities for profitable revenue growth, increasing shareholder value in the process,” Zieser said.