Meredith Seeks $150 Million for Sports Illustrated

SI

Meredith Corp. (MDP), which acquired Time Inc. for $1.84 billion in January, is seeking more than $150 million for Sports Illustrated (and SI swimsuit). The company doesn’t value the brand’s male dominated readership base, with the MDP’s strengths lying in women’s magazine sales (think: Better Homes & Gardens, Martha Stewart Living). The global investment bank Houlihan Lokey has been tasked finding a buyer and facilitating the transaction, which MDP hopes to complete within 120 days.

Howie Long-Short: Meredith (the U.S.’ largest magazine publisher, owns 17 TV stations) acquired TIME to build scale as a digital publisher (now receives 170 million unique visitors/mo.), but this deal also provides them with financial strength and flexibility. MDP expects the “acquisition will be accretive to free cash flow in the first full year of operations” and anticipates generating +/- $500 million in annual cost synergies over “the first two full years.” The company shed 200 duplicate corporate staffing jobs in March and plans to cut 1,000 more within the legal, financial and human resources departments over the next 10 months.

Sports Illustrated isn’t the only label Meredith is looking to unload; Time, Money and Fortune (the most valuable of the 3) all have audiences (and advertising bases) that differ greatly from the balance of the MDP portfolio (80% is millennial women). The company hopes to get $100 million for each of those 3 labels.

It must be noted that on January 27th, MDP increased its annual dividend 4.8% to $2.18/share. It is the 25th year in a row that the company has increased its dividend and the 71st consecutive year it has issued shareholder returns. Shares are down 19% since January 31st, the day the company announced completion of its TIME acquisition.

Fan Marino: Wondering who might buy Sports Illustrated? Keep an eye on Jay Penske, the founder of Penske Media Corp. Jay recently sold a minority share of the business for $200 million in cash, to the Saudi sovereign wealth fund (so he has some cash laying around). You may recognize the Penske name. His father Roger, owns Penske Racing; which operates teams on both the NASCAR and IndyCar circuits (so he has sports ties). Brad Keselowski, Ryan Blaney, Joey Logano, Helio Castroneves and Juan Pablo Montoya are among Team Pensky’s most recognizable drivers.

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Media Sector Consolidation Continues as Meredith Corp. Buys Sports Illustrated (and TIME Inc.)

The Meredith Corporation (MDP) acquired Sports Illustrated and Golf Magazine (and the balance of TIME) for $2.8 billion ($18.50/share); after failing to acquire the company earlier this year (and an initial attempt back in 2013). The acquisition gives the Better Homes and Gardens publisher 200 million consumers across all platforms. There is speculation that with the addition of TIME’s publishing assets, MDP could spin off its broadcasting assets (including the newly-launched SI TV). Koch Equity Development is backing the Meredith bid with $650 million in financing.

Howie Long-Short: At $18.50/share, MDP paid a 9.5% premium on the price ($16.90) at Friday afternoon’s close and a whopping 46% premium over the closing price on November 15th. Earlier this month, TIME reported that Q3 revenue declined 9.5% (to $679 million); the 6th straight quarter the company missed Wall Street expectations. Magazine revenue, which still accounts for roughly two-thirds of all company revenue, was down 17% (to $1.3 billion) over the first 9 months of the year.

Fan Marino: Meredith clearly foresees a future for the magazine industry, but it’s Sports Illustrated that received recent acclaim for its fortune-telling prowess. Back in 2014, when the Astros were among the worst teams in baseball, SI published an issue predicting the team would win the World Series in 2017; with George Springer on the cover. Fast-forward 3 years, the Astros are WS Champions and George Springer was the World Series MVP.

Meredith, backed by Koch brothers affiliate, to acquire magazine publisher Time

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