Deals & Developments

Folio: The Magazine for Magazine Management, March 1, 2004

This was supposed to be the year when magazine M&A came roaring back, right? So why does it still feel so much like 2003? Be patient. "There are a lot of deals in the pipeline," says Robert Crosland, managing director at AdMedia Partners. "It's just a very deliberate process of getting them closed these days . You have people who want to do the deal, but they're afraid next year they'll be able to get a better price." The good news, according to DeSilva & Phillips' 2004 M&A outlook, is that the conditions that have been holding would-be buyers and sellers back "are definitely ending: Lenders are lending. Assets are more leverageable. And stock prices - and the cash flow that drives prices - are up for most media companies." In other words, it's only a matter of time.

DEALS

AROUND THE WORLD WITH TIME OUT AND OUTSIDE

Time Out, which is planning to launch a Chicago edition this fall, is warming up by colonizing Chilango. That's the name of a monthly Spanish-language lifestyle magazine aimed at residents of Mexico City. London-based Time Out Group has licensed the rights to publish a Time Out-branded listings section to Chilango publisher Grupo Editorial Expansion. The deal was brokered by Cue Ball, a Boulder, Colo.-based company that specializes in international new business development. Cue Ball CEO John Cabell says in the past two years he has arranged 10 deals for Time Out, including one for a Shanghai edition that will launch in May. "What you have with Time Out is really a concept and a brand but no content at all," he says. "It's a brand that's reaching critical mass internationally." Another Cue Ball client, Mariah Media, has licensed the rights to publish the first international editions of Outside magazine. ROC Nordic AB, a Stockholm-based publisher, will publish a bimonthly Swedish edition beginning in April, with Finnish and Norwegian editions set to follow in 2005 and 2006, respectively.

REED AND IDG TEAM UP FOR CHINESE VENTURE

Through a strategic alliance with International Data Group, Reed Business Information plans to launch 20 new Chinese-language magazines over the next three years, cracking open one of the world's biggest and most underexploited media markets. First up are Chinese editions of Variety and Packaging Digest, with subsequent launches likely to include Broadcasting & Cable, Wireless Week, TWICE and Construction News.

IDG has been publishing in China since 1981, making it the natural choice for an ally, says Reed CEO Jim Casella, who formerly served as COO at IDG. "We felt that a partner who has really set up an infrastructure over 20 years would accelerate our entry in a way we would not get on our own," he says.

China stopped subsidizing its magazine industry last year, causing roughly a quarter of the country's 7,500 titles to fold. Distribution is a problem, with the current system reaching only about 40 percent of the population. But IDG chairman Pat McGovern says his company is working to establish a new system that will reach 90 percent of the country, a development that he projects will cause newsstand sales to double by the end of 2006. Moreover, in contrast to the U.S., where 50 percent sell-through is considered stellar, magazines typically sell out on Chinese newsstands, even though a single issue can cost the buying power equivalent of $25 or more. "The economics of publishing in China are very attractive," says McGovern.

REORG AND RELAUNCH FOR AILING PENTHOUSE

Things are finally looking up for Penthouse. Thanks to a court-approved reorganization plan, the down-on-its-luck porn company is set to climb out of bankruptcy by the end of this month. Penthouse owner General Media announced that it has begun sending ballots to its creditors to allow them to vote on the plan, under which new securities will be issued and General Media will receive $35 million in cash. An investment group headed by Marc Bell believes that it can rescue Penthouse by relaunching the title as a less raunchy, more sophisticated alternative to men's magazines such as Maxim and FHM.

AIM SCORES A HIT WITH HOME BUYER

Active Interest Media has struck again. The new niche media roll-up, formed last fall and headed by former Times Mirror CEO Efrem "Skip" Zimbalist III, has acquired Home Buyer Publications. Based in Chantilly, Va., Home Buyer publishes two consumer titles, Log Home Living and Timber Frame Homes, and a trade title, Building Systems. It also owns 10 trade shows and several dozen seminars. Zimbalist says Home Buyer's portfolio made it a natural fit for AIM, which acquired Log Home Design Ideas magazine as part of its purchase of Sabot Publishing last October. Details of the deal were not disclosed, but a source close to the transactions says the multiple approached double digits. He adds that AIM, which is backed by $40 million in private equity from Chicago-based Wind Point Partners, is looking to add more properties in the areas of home, art and healthy living. Representing the seller in the deal was Mill Creek Partners of Philadelphia.