Delayed Unimag Purchase Making Industry Jittery

Circulation Management, June, 1999

A delay in wholesaler Chas. Levy Co.'s planned acquisition of Dublin, OH-based United Magazine Co., or Unimag, has publishers worrying whether a deal-breaker could leave them, as well as national distributors, holding the bag. Unimag, which has been struggling financially for some time, has now racked up about $150 million in receivables owed to NDs, and the size of the debt has necessitated restructuring the acquisition deal, according to industry sources. At press time, sources said that the acquisition could be further jeopardized by the fact that one of Unimag's largest retail customers, Cincinnati-based supermarket chain Kroger Co., had agreed to turn over its Cincinnati stores to Anderson News LLC and its Detroit-area stores to The News Group. Publishers and NDs were attempting to block the changes by threatening to stop product supply to those regions unless Kroger stays with Unimag. Kroger, in turn, was reportedly threatening to remove from all of its stores nationwide the titles of any publisher who refuses to use The News Group and Anderson. "The national distributors are playing hardball to try to get their receivables," said one VP, consumer marketing. "Most people still think that the Unimag acquisition is going to happen," he added. "Levy's been working on this deal a long time, and they really want it"

Even if Chicago-based Levy acquires Unimag, which it still hopes to do by the end of this month, NDs will have to eat large sums. For example, if Levy offers NDs 40 cents on the dollar--one possible number mentioned by sources--NDs would still have to absorb approximately $90 million, instead of the $150 million they'd lose if the Levy acquisition fell through and Unimag declared bankruptcy. "Either way, this would amount to a mini-tsunami for this industry--and publishers certainly aren't going to be unaffected," asserts one consumer marketer. "If national distributors take a big hit, they're going to find ways to pass the costs along to publishers," agrees another publishing executive. These sources also note that NDs have been adjusting contracts in recent years, so that some publishers may not be protected from assumption of debt, as was standard in the past. "Publishers should be looking very closely at their contracts right now," says one.