Who Is and Isn’t Bidding on Time Inc.
An interesting mix of investors are considering investing in Time Inc.
Time Inc. (NYSE: TIME) is on the market and eagerly seeking suitors who were asked to submit bids last week. According to Media Post, an investor group led by Edgar Bronfman Jr., the former CEO for Warner Music Group, was among those considering a bid. USA Today reported that, last November, Bronfman offered to buy Time Inc., who publishes more than 100 brands including Time, People, Sports Illustrated, Fortune, Sunset and Real Simple, for $18 per share, but Time Inc.’s board turned down the offer. Bronfman has now withdrawn from the bidding process, said USA Today. Last week the Wall Street Journal reported that Najafi Cos. may be submitting a bid.
At the end of February, the New York Times reported that five parties were considering a bid, including Meredith Corp. Meredith and Time had previously considered a deal in 2013, but were not able to reach an agreement. Instead of merging, Time split off from Time Warner Inc. Time Inc.’s board has not yet decided to sell the company, but is considering its options which could include bringing on an investor, said the New York Times.
Why the need to change? Like other media companies, Time Inc. has struggled with large declines in print advertising and circulation revenue. In its fourth quarter and full year 2016 financials, released on February 16, 2017, Time Inc. reported mixed results. Highlights include:
- Q4 revenue decreased $10 million, or 1 percent year-over-year.
- For 2016, revenue decreased $27 million, or 1 percent year-over-year, primarily due to declines in print and other revenues and circulation revenue.
- Q4 advertising revenue grew by $25 million, or 5 percent year-over-year.
- For 2016, advertising revenue increased $57 million, or 3 percent, year-over-year, due, in part, to growth in digital advertising revenue related to social media and programmatic sales. These gains were offset by a decrease in print and other advertising revenues.
- Q4 circulation revenue decreased $31 million, or 11 percent year-over-year.
- For 2016, circulation revenue decreased $99 million, or 9 percent year-over-year, due to lower domestic subscriptions and international and domestic newsstand sales.
- Q4 digital advertising revenue grew 63 percent year-over-year.
- For 2016, digital advertising revenue exceeded $500 million, a 55 percent increase year-over-year.
In a statement, Time Inc. President and CEO Rich Battista said, "We are pleased with our progress and achievements during the quarter and our execution against our plan. In 2017, we are well positioned to accelerate our growth across digital and other media. Time Inc. is a unique platform in today’s dynamic media environment.”
“We combine world-renowned content and iconic brands at massive scale with best-in-class targeting, measurement and data capabilities, giving us a tremendous value proposition for both consumers and advertisers. In December, Time Inc. broke into the top ten for the first time in U.S. multi-platform unique digital audience according to comScore. We reached nearly 60% of the total U.S. adult digital audience. In 2016, our digital video experienced explosive growth, up nearly 150% year-over-year to an all-time high for video starts at 4.6 billion,” added Battista.
The day after financials were announced, Time Inc. stock was priced at $19.25 per share. A month later it sits at $19.05 per share. This is considerably more than its share price of $12.55 on November 4, 2016, its low for the last year, and its stock price of $15.28 per share on March 17, 2016.
As Bloomberg points out, Time Inc. has four options (1) sell itself to another company, (2) sell off some of its brands and media properties, (3) take on a private investor(s), or (4) stay as it is now. If the company stays as it is now, to see significant growth, it needs to continue to produce significant increases in digital advertising revenue and find additional ways to cut costs. Acquiring a profitable company to diversify revenue streams is another option. We don’t think Time Inc. will stand still. Whether they merge or take on an investor, we think they’ll make some kind of a move, especially with their stock price inching upward.