Barry Diller’s InterActive Corp (IAC) is in advanced talks to acquire America’s largest magazine publisher Meredith Corp, owner of brands including People (America’s largest and most profitable magazine), Allrecipes, InStyle, and Better Homes & Gardens, according to the Wall Street Journal. The price is believed to be more than $2.5bn (yesterday’s market cap: $1.8bn). Meredith earlier this year agreed to sell its local TV business to Gray Television Inc.
The decision to sell the rest of the company (most of whose profit is accounted for by People magazine and the highly-successful Walmart product merchandising by Better Homes & Gardens) would mark a major reversal for Des Moines-based Meredith, which less than four years ago bet big on the future of magazines when it agreed to buy the legendary Time Inc. for $3.2bn (reducing the net cost by some $500m with the subsequent sell-off of Time, Fortune, Sports Illustrated, and Money).
The Time Inc acquisition made Meredith America’s magazine leader but it was not long before CEO Tom Harty acknowledged that it was taking longer than expected to turnround the “new” magazines. Advertising and subscription yields had both been much worse than expected. Crucially, Meredith clearly under-estimated the culture differences between the two companies and also the costs of integration. Its share price tumbled more than 20% and the resulting market cap (still) of under $2bn tells the story of worried investors and a management team under pressure. Bloomberg had quoted one analyst as saying that Meredith “didn’t know what they were buying with Time Inc.”
The disastrous deal – and the continuing decline in print media values – helps to explain why a price tag of $2.5bn implies that 38% of Meredith’s value has evaporated since 2018.
That is the context for investors now being more than ready to sell to IAC or someone else.
It is believed that – if IAC fails to negotiate a deal – others will now seek to buy Meredith. But it will be too soon for Future Plc, which bought Time Inc’s UK subsidiary from Meredith. The fast-growing, £4bn listed Brit-US magazines group is currently completing its £300m acquisition of Dennis, publisher of The Week and Kiplinger financial newsletters, soon after buying the £594m GoCompare cost saving site.
Could News Corp or the Murdoch family’s other listed media company Fox Corp be preparing to bid for Meredith? Or perhaps they would be interested only in People which is a substantial brand across TV and online as well as print?
