Time Inc., the magazine wing of Time Warner, has emerged as the surprise winner of the hotly contested derby to buy Times Mirror Magazines from the Tribune Company.
Sources close to the negotiations say the price tag is $475 million. The deal is expected to be formally unveiled today.
Time Inc. beat out two other finalists: Arthur Sulzberger Jr. and the New York Times Company; and David Pecker and American Media, owners of the National Enquirer, Star and the Globe.
“We’re excited to have them,” said Time Inc. CEO Don Logan, reached late last evening.
“They fit well with our organization,” he said. “They’re very complimentary without any overlap.”
Logan said he sees the titles fitting well with the company’s powerhouse weekly, Sports Illustrated, headed by SI president Michael Klingensmith. But Logan said the corporate structure has not been decided yet. Klingensmith did not return calls.
The acquisition gives Time Inc. a boatload of large circulation magazines, including Golf Magazine – the jewel of the group and its No. 1 profit maker – as well as Field & Stream, Popular Science and Outdoor Life. Each of the titles sells more than 1.4 million copies a month.
But the deal also includes a wide range of niche titles, including Ski and Skiing, and micro niche titles aimed at a young market, including Freeze and Ride BMX and teen titles Transworld Snowboarding and Transworld Surf, among others. In all, there are 21 magazines in the group, which is projected to have 2000 revenue of about $270 million and profit of close to $35 million. Last year, the profits were closer to $25 million, which means the auction fetched a full price of close to 19 times earnings.
Initially, industry sources were speculating that the titles would only fetch around $350 million. But by the time the second round closed, there was speculation that it would come close to $500 million. Primedia, Gruner + Jahr USA Publishing, a unit of Bertelsmann; and Emap USA, a part of Britain’s Emap PLC, all dropped out in the final round.
At one point in the bidding, the Web site Inside.com said that Time Inc. had also dropped out of the second round, citing a Time Warner executive who “guffawed” at a New York Post story that cited the company as a likely bidder. But the executive turned out to be clueless. Management, headed by group president Jason Klein – long rumored to be interested in acquiring the titles for themselves – also never put in a bid, despite persistent rumors that they might.