1999's MARQUEE DEALS

Folio: The Magazine for Magazine Management, Jan, 2000 by Susan Thea Posnock

THE MERGERS AND ACQUISITIONS THAT MOST TRANSFORMED THE INDUSTRY LAST YEAR WERE LARGELY DRIVEN BY COMPANIES LOOKING TO TRANSFORM FROM BIG-TIME PUBLISHERS TO BIG-TIME MEDIA PLAYERS.

A COMMON PITCH FROM COMPANIES POSITIONING

their Web sites is that those sites offer something different from what's in print. But the theme behind many of the major deals in the last year is a twist on that pitch--that integrated media companies can offer something different from Web-only players. Thus, magazine companies in 1999 were buying assets with an eye toward gaining total coverage of a market, with print, the Internet, trade shows, television and other ancillary products as part of the package.

"This market-sector focus has driven most of these deals," says Wilma Jordan, CEO, The Jordan Edmiston Group. "People don't just buy things opportunistically anymore. They really buy them from a standpoint that they fit strategically."

Adds Rob Garrett, president of AdMedia Partners Inc., "Prices have gotten very high, and people have gotten very picky about what they'll buy and what they pay. Bulk for its own sake is a lot less important--now people are strategically purchasing companies that fit and selling off the pieces that don't."

Overall, 1999 was another blockbuster year of mergers and acquisitions for the magazine industry, and included one of the biggest deals in magazine history--the $9.2 billion acquisition of TV Guide Inc. by Gemstar International Group Ltd. in October.

And there was no slowdown: By the end of the third quarter, according to Whitestone Communications, there were 48 consumer-magazine deals totaling $1.6 billion, compared to 44 totaling $3.7 billion in the same period of 1998. Trade magazine and trade show M&A activity was also comparable, with 76 deals totaling $3.4 billion through the first three quarters of 1999, and 85 deals valued at $2.2 million in 1998.

The top-15 deals, as rated by DeSilva & Phillips, accounted for 96.6 percent of the dollar volume for the year. Among those deals, private equity funds, including Veronis, Suhler & Associates, remained major players.

But perhaps the biggest trend is the one toward convergence: While companies are paying a lot, insiders say the deals now make sense. Magazines, instead of being diminished by the Web, are trying to put themselves in a stronger position as strategic players--offering content unavailable on the Net--with expanding dot.com operations.

1. TV GUIDE INC.

BUYER: GEMSTAR INTERNATIONAL GROUP LTD. SELLER: TV GUIDE INC. PRICE: $9.2 BILLION IN STOCK AND DEBT DATE: OCTOBER

The acquisition of TV Guide Inc. tops the list of magazine megadeals for the second year in a row. But if 1998's deal was easily the biggest in terms of price, 1999's sale of the nation's top-revenue-producing magazine blows away the field. Gemstar International Group Ltd., a Pasadena, California-based maker of television program guides for electronic devices, and a company that is much smaller than TV Guide Inc., bought TV Guide for $9.2 billion in stock and debt. The transaction is expected to close in the second half of 2000 and is subject to regulatory approval.

At a time of intense focus on brand extensions, this deal is a prime example, although admittedly a unique one, of how traditional publishing is converging with new media. While Gemstar recognizes the importance of acquiring the magazine industry's perennial revenue leader, its motivation is to build a television-information portal that will combine the print. Internet, television and interactive electronic-program guide platforms of both companies. "A coordinated campaign using all four media properties will probably reach just about everybody you want to reach who cares about television watching," says Gemstar chairman Henry Yuen, who will serve as the chairman and chief executive officer of the combined companies. He describes how TV Guide fits in: "Here are 11 million households, or 34 million readers, who have pretty much put the money where their mouth is to be dedicated TV watchers," he says.

The deal unites rivals for the interactive television program guide market. The two had been involved in a six-year legal battle. (Gemstar sued TV Guide, claiming its programming-guide technology infringed on a Gemstar patent.) The old TV Guide Inc. was formed last year with the sale of the magazine and related holdings by Rupert Murdoch's News Corp., and topped FOLIO:'s list when it was sold by Murdoch to United Video Satellite Group.

2. CMP MEDIA INC.

SELLER: CMP MEDIA INC.

BUYER: UNITED NEWS & MEDIA PLC

PRICE: $920 MILLION

DATE: MAY

Before last May, Miller Freeman Inc. had long been a player in technology publishing, with businesses in a variety of niche markets, many of them aimed at software developers. But the acquisition of CMP Media by Miller Freeman parent United News & Media for $920 million doubled the size of Miller Freeman. And it created for MFI a dominant presence in high-tech media. In that one move, Miller Freeman became the nation's third-largest technology publisher, behind International Data Group and Ziff-Davis Inc.