Media Fortune Fame & Folly

Bauer deep in the Pacific

The €2bn-revenue Bauer Media, which could once be characterised by its steady, conservative decision-making and a deep attachment to print, is in trouble in the AsiaPacific where it has spent at least A$650m in the past seven years vainly trying to turnround what was once a world-class magazines group. It is a real mess.

After securing approval for its A$40m acquisition of Pacific Magazines, its closest Australian rival, Bauer (which had almost blown regulatory clearance by disclosing it had been in negotiations to sell its Sydney-based subsidiary to Mercury Capital) has now closed its New Zealand company with the loss of 235 jobs.

The Auckland business, which had been the most consistently profitable part of the former ACP Magazines and provided its last two CEOs, shocked the government and media industry with the decision to close rather than furlough its employees under a government Coronavirus scheme.

The company – which publishes some 20 magazines including North & South, Metro, Next, and NZ Women’s Weekly – is believed to have made EBITDA of some A$11m in 2019, almost one-third of Bauer’s combined profit for Australia and New Zealand.

The NZ Prime Minister said she was “gutted” by the decision to close the country’s largest magazine publisher. The sudden decision may, presumably, be influenced by any or all of the following:

  • The NZ government’s decision to stop all print media operations other than daily newspapers during the virus outbreak – even though it was prepared to subsidise furloughed employees.
  • Deteriorating trading and pessimistic prospects for 2020-21
  • Bauer’s attempt to re-negotiate the contracted pre-virus price of the Pacific acquisition in Australia
  • A belief that it will be easier to sell the Aussie company without what may have become its lossmaking New Zealand subsidiary

The abrupt closure was followed by announcement of “a strategic review” of the Australian business. This will have got the attention of Mercury Capital (which may still be interested) but also of News Corp subsidiary News Life Media (NLM). Acquisition of Bauer and Pacific would give NLM an astonishing monopoly of the Australian magazine market, bringing together the three largest publishers. While that might just be too much for the regulator, it must be a tempting thought at a time when the companies are at risk.

More important, such a deal might (in spite of recent denials) also become part of a long-touted News Corp acquisition of Pacific Magazines’ owner Seven West Media, operator of Channel Seven TV. SevenWest is under pressure to reduce its A$540m borrowings. The listed company has lost 85% of its share value in the past year, and the current market cap is just 20% of its debt. Everything is in play. The only certainty is that Bauer is ready to exit the Australian market less than eight years after it splashed A$500m to acquire ACP Magazines from CVC private equity.

What a difference to 2012.

Yvonne Bauer, the fifth generation of her family to manage the 145-year-old company, had been euphoric as she strolled in the Sydney sun and declared her longterm commitment to Australia. On the first of what became regular trips to Sydney, she told reporters: “With its cleverly devised digital strategy, ACP is a perfect component of the Bauer Media Group – and that’s not all: through the acquisition in this sector, our hope is also to boost our international business. As a result, ACP represents our vision for the future.”

But the honeymoon didn’t last long as the Aussie acquisition piled up losses, missed its budgets, lost key managers, closed magazine after magazine, and did too little too late to digitalise its legendary brands.

Of course, Bauer paid too much for a business which had been shaken up by clumsy private equity executives. It also managed to change CEOs almost every year, even appointing one hapless UK-based executive to do the job part-time.

Now, Ms Bauer faces the final embarrassment of selling her AsiaPacific companies for, perhaps, one-tenth of what she has invested. She is said to have become disenchanted with the business about 20 months ago, and hasn’t been back since.

Bauer Media Group