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It takes persistence for a style-aware incomer to extract a merger agreement from a patrician target. But enough of Meghan and Harry. Media group Meredith Corporation, is buying rival Time Inc on its third attempt. The Iowa-based owner of lifestyle magazines and TV stations is thereby taking control of one of the US’s most august periodicals.
Is this, as an FT reader quipped, the end of Time? The $2.8bn deal is going ahead thanks largely to the backing of the Koch brothers, industrialists with a penchant for backing conservative causes. They are putting up $650m of the $1.9bn cash consideration, even as Meredith takes on Time’s net debt of around $900m.
However, the liberal news magazine is unlikely to start running photos of alt-right provocateur Steve Bannon airbrushed rather than angry. The Kochs will get a meaty 8.5 per cent dividend yield on their preferred equity. They do not get a board seat or a say in editorial policies.
If Meredith has struggled to finance this deal before, it would reflect two things. First, a desire to limit net debt, to which the prefs do not contribute. Second, the difficulties inherent in turning round Time Inc businesses. Operating profit has fallen for five successive years.
Meredith’s own profits have risen steadily, propelled by local TV and by magazines offering tips on pregnancy and home furnishing. The group covets Time Inc titles like People and InStyle, not Time itself. Titles of this kind have survived the onslaught of digital better and may be transferred more successfully to the new medium
Meredith is paying a steep 48 per cent premium to Time Inc’s undisturbed three-month average share price. Though paying eight times its earnings before interest, tax, depreciation and amortisation is not excessive. Meredith is more likely to achieve target annual savings of $450m than Time was to save $400m on its own. Moreover, cost cuts should fall straight to the bottom line. Taxed and capitalised, they more than cover the cost of the takeover.
Moving overheads from Manhattan to Des Moines will doubtless be one wheeze. But Time journalists may avoid relocation to a state better-known for producing pork bellies than political commentary. Meredith should sell the title. It is worth far more to a trophy-hunting billionaire than a mid-West magazine publisher.
The Lex team is interested in hearing more from readers. Is this the end of an era for Time magazine? Please tell us what you think in the comments section below.