On the snowboard side, it might be business as usual, but this deal is like hell feezing over on the surf side. Primedia, owners of Surfing Magazine, as well as Surfing Girl. Surf Guide, and a whole bunch of automotive, teen, outdoor, consumer electronic, and special interest magazines like Modern Bride and Soap Opera Digest, has bought Emap USA, owners of Snowboarder, Surfer, Powder, Bike, Skateboarder, and a whole bunch of other magazines like Hot Rod and Guns & Ammo.
The surfing rivalry had been vicious for 35 years. In addition to the surfing side, several of Emap USA’s largest titles had competed directly with similar magazines from Primedia in the automotive, outdoor sports and teen areas.
The deal ends Emap international’s disastrous foray into the U.S. magazine market, which it paid $1.34 billion for the Peterson magazine unit three years ago (then renamed the group Emap USA.)
Emap said the sale of its U.S. group would allow it to focus on its assets in France and Britain. It will continue to develop internationally via the men’s magazine FHM, now published in 15 countries.
“In the context of a difficult U.S. market we regard the sale as a reasonable result,” said group chief executive Robin Miller.
Emap USA has more than 60 consumer titles reaching over 75 million enthusiasts through a combination of magazines, network and cable television shows, web sites, and live consumer events.
Primedia believes the Emap USA properties uniquely complement many of its existing products in key niche markets including automotive, teen, outdoor, active sports and consumer electronics. Primedia now has more than 280 consumer and business to business magazines, in addition to its video and Internet properties.
Under the terms of the agreement, Primedia will pay $515 million for Emap USA, consisting of $505 million in cash and warrants to purchase 2 million shares of Primedia at $9 per share that have been valued by Merrill Lynch at approximately $10 million. The transaction, which is subject to customary closing conditions including regulatory review, is expected to close by the end of the third quarter. The acquisition does not include the U.S. edition of FHM.
Tom Rogers, Chairman & CEO of Primedia, stated: “While the word synergy is often overused, this could not be a more synergistic transaction for Primedia. Beyond providing great scale in catapulting Primedia to the number two spot in the magazine industry in revenues and single copy sales, it further cements our position as the number one producer of magazine editorial and advertising pages each month. Moreover, the Emap USA magazine properties strengthen Primedia’s unique mix of category specific endemic advertising (with its far more stable characteristics than general brand advertising), as well as circulation revenue which is an increasingly important component of the Company’s financial model.”
For the fiscal year ended March 31, 2001, Emap USA (excluding FHM) had revenues of $362 million and EBITDA of $54 million. For calendar year 2001, Primedia expects Emap USA EBITDA to decline to approximately $46 million. With cost synergies and revenue growth, it expects this EBITDA to increase to $62 million, or 35%, in 2002. Consequently, the price is 8.3X projected EBITDA.
Primedia’s sales in 2000 sales were $1.7 billion from a unique combination of traditional and new media properties.
-from the AP story and by John Stouffer