VS&A and BBC Create $100M Consumer Media Company

Folio: The Magazine for Magazine Management, March, 2000 by Jennifer Owens, Heather Holliday

Joint venture will spend $300M on acquisitions in natural science children and lifestyle segments.

BBC Worldwide Americas Inc., the North American subsidiary of the British Broadcasting Company, has joined with Veronis, Suhler & Associate's $1 billion buyout fund to create a new $100 million U.S. consumer media company.

According to the partners, their as-yet-unnamed, 50-50 joint venture will focus initially on acquiring consumer lifestyle and informational publishing properties, all the while focusing on cross-media expansion potential.

To do that, Peter Phippen, who oversees the new venture as BBC Worldwide America president and CEO, says the new venture will incorporate BBC's existing North American video department.

Phippen says the venture, which was announced in early February, is likely to spend about "$300 million on acquisitions to get us going." The venture plans to look at segments such as natural science and children's titles (BBC is the largest publisher of children's content in the United Kingdom), as well as lifestyle magazines covering areas such as home, gardening and food.

"We've got a number of things in mind and we're in the position to get into serious discussions," Phippen says. "We want to talk to a few people and explain what we can bring to the market. We're not just a magazine publisher."

Overseas strategy

BBC is also aiming to expand its ranking as the third largest magazine publisher in the United Kingdom and become a major U.S. player. BBC Worldwide says such a move is the prime element of its global plan, and will enable it to grow its revenue streams beyond pure licensing deals.

Some industry observers question the move, however. "The United States is a tough market to go into," says one London-based media analyst who requested anonymity. "Emap has done it [with its December 1998 buy of Petersen Cos. Inc.], but it still remains to be seen whether they will be successful."

The analyst adds that BBC Worldwide has its own branding issues to deal with. "BBC Worldwide has never exploited its worldwide brand the way it should have," he says. "So this is an interesting move."

Meanwhile, Kevin Gruneich, a publishing and information analyst at Bear Stearns, calls the deal "a unique structure." Says Gruneich, "It makes a whole lot of sense for the BBC to use a group like Veronis, Suhler that has been on the ground in the publishing business in the U.S. and knows their way around. It will reduce the risk substantially."

It will also bring VS&A's newest and biggest buyout fund into the consumer arena. James Rutherfurd, who heads VS&A's investment banking group, says it was BBC's multimedia experience that first attracted VS&A to the British company about six months ago. "BBC has executed [multimedia brand extensions] in spades in the U.K.," he says. "It's something they're good at."