The Australian subsidiary of Bauer Media Group today (Friday) finally completed the A$46.6m acquisition of its key rival Pacific Magazines from Seven West Media (SWM). It had vainly tried to re-negotiate (or withdraw from) a deal which had been struck months before the Covid-19 outbreak. Bauer has paid A$40m in cash and will provide SWM with A$6.6m in magazine advertising.
The deal gives Bauer Media Australia perhaps 70% of the magazines market. In a post-Covid world, where profits have been decimated by falling ad revenues, that dominance may seem not to mean very much. But the enlarged company’s tight grip on newsstand sales (which account for the majority of revenue) will ultimately deliver a recovery in profits, as will further cost savings.
With substantially all of Australia’s best-known magazines, the company can become successful again. Monopolies can manage that.
Completion of the Pacific deal followed this week’s decision by Bauer to suspend the printing of “certain titles”, 70 redundancies and up to 70 furloughed employees. While Bauer did not confirm which magazines would be suspended, they are believed to include the fashion monthlies Harper’s Bazaar, Elle, and the gossip weeklies OK! and NW.
It is significant that the acquired Pacific portfolio includes the fashion magazine Marie Claire and the gossip weeklies New Idea and Who Weekly. In effect, Bauer has made cuts to its existing magazines rather than immediately closing any of those it is acquiring. It is, therefore, treading carefully round public and political opinion. Nobody really doubts that further consolidation of brands will be necessary, especially if advertising does not rebound substantially after the end of Covid restrictions.
For now, though, the changes will help to maximise the results of the combined portfolio – despite the Bauer assurance that “The affected brands’ digital assets will continue to operate. The decision to resume print publication will be made once the trading environment improves.” Mmm.
Pacific’s most profitable magazine is Better Homes & Gardens which, with Bauer’s homes and food portfolio, may become the strongest part of the combined business.
The sale of Pacific Magazines had been vital to Seven West Media which needs to reduce its A$541m borrowings. The country’s second largest TV network is also in sale and leaseback talks for the A$75m headquarters of its West Australian Newspapers. Some kind of deal involving its TV Channel 7 and News Corp still looks likely.
Meanwhile, Bauer’s next move may be the sale of its Australian company. Having abruptly closed down its New Zealand subsidiary (whose portfolio may now be sold-off piecemeal), the German-owned media group is believed to have been approached recently by would-be buyers. Several private equity firms are interested, and so they should be. The former ACP Magazines, under CEO Brendon Hill, now represents a prime opportunity for a range of tech-savvy investors.
During the competition regulator’s review of the Pacific deal, Bauer had admitted it was in “advanced negotiations” to sell the company to Mercury Capital, of Sydney. These talks were said to have been ended by the virus outbreak. But a sale – to someone – is now highly likely. The AsiaPacific nightmare may soon be over for the Bauer family.