Magazine Publisher Is Selling Special-Interest Unit for $1.15 Billion

Magazine Publisher Is Selling Special-Interest Unit for $1.15 Billion
By REUTERS
http://www.nytimes.com/2007/05/15/business/media/15mag.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1179231581-uGvhsx+BQQZfEuASMJ780A

The publisher Primedia said yesterday that it would sell its Enthusiast Media division, which includes magazines like Motor Trend, Soap Opera Digest and Surfer, for about $1.2 billion in cash to Source Interlink Companies, which is controlled by the billionaire investor Ronald W. Burkle through his Yucaipa investment firm.

The unit, which Primedia said in February it would consider selling, includes more than 70 magazines and 90 Web sites. It leaves Primedia with its Consumer Source business, which publishes free consumer guides.

The move comes after Primedia agreed to sell its hunting and fishing magazines to the private equity firm InterMedia Partners for $170 million in cash in December.

Primedia expects $1.15 billion in net proceeds and will be debt-free after the sale.

Source Interlink, which is based in Bonita Springs, Fla., said it expected the all-cash deal to add to adjusted earnings per share excluding one-time costs.

Source Interlink manages retail checkout areas for more than 1,000 retail chains and makes in-store displays. It also manages the delivery of magazines and other entertainment products like DVDs to retailers and consumers.

The deal is expected to close in the third quarter. Source Interlink said Enthusiast Media would operate as a division and would be led by Steve Parr, who heads the group at Primedia.

Primedia said that certain stockholders affiliated with the private equity firm Kohlberg Kravis Roberts & Company who own 61 percent of its shares unanimously agreed to the deal.

Primedia shares rose 34 cents, to $2.83, while Source Interlink shares fell $1.01 cents, to $5.79.

Major Magazine Distributor Acquires Primedia Enthusiast Magazines

Major Magazine Distributor Acquires Primedia Enthusiast Magazines
by Tony Silber
http://foliomag.com/viewmedia.asp?prmMID=7715

Source Interlink Companies, one of the leading magazine distributors, announced today that it is acquiring Primedia Enthusiast Media (PEM) in a stock purchase for approximately $1.2 billion in cash.

A public company based in Bonita Springs, Florida, Source Interlink also distributes DVDs, music CDs, and books. It generated about $1.9 billion in its fiscal 2007, which ended January 31.

Source Interlink is controlled by Yucaipa Cos., a supermarket-holding company owned by billionaire businessman Ron Burkle. Last week, Folio: reported that insiders were saying the Burkle bid was coming on strong, although one source told Folio: the Burkle bid (mentioned to be in connection with American Media) was not being taken seriously. “It is a stunning development that a publicly owned distribution company controlled by Ron Burkle is buying one of the largest portfolios of enthusiast magazines,” one source said Monday morning. “It’s shocking. The valuation is significantly higher than they would have gotten from others.”

Indeed, Source Interlink also paid significantly more than sources in the last few weeks indicated the company might get. PEM, with revenue of about $524 million and EBITDA of about $100 million, turned out to command an EBITDA multiple of about 12-times.


To fund the acquisition, Source Interlink has secured a financing commitment from Citigroup Global Markets. It was unclear at presstime whether American Media was involved.

Source Interlink has been on a buying spree in recent years. In 2004, it acquired Empire News, and in 2005, it acquired Chas. Levy Circulating Co. for $30 million, giving it about 20 percent of the single-copy magazine-distribution market.

“Over the last several years Source has driven the consolidation of a fragmented and inefficient channel for the distribution and merchandising of home entertainment content at retail and the newsstand,” said Source Interlink chairman Michael Duckworth. “This acquisition is a first step to leverage what we have built by transforming Source into a fully integrated media company with both print and digital content. Primedia Enthusiast Media's industry-leading special interest magazine titles and consumer Web sites diversifies our earnings streams and accelerates our growth.”

Following the completion of the transaction, PEM will operate as a division of Source Interlink and will be headed by Steve Parr, PEM’s current president. He will report to Duckworth.

PEM is the leading special-interest magazine publisher in the U.S., with over 70 magazines. Its portfolio includes: Motor Trend, Automobile, Hot Rod, Lowrider, Soap Opera Digest and Soap Opera Weekly, Power & Motoryacht