Less than two months after Meredith Corporation’s (NYSE: MDP) acquisition of Time Inc. closed, Meredith announced an aggressive plan to integrate Time Inc. into its portfolio of media brands, to include the layoff of 1,200 employees. The company is focused on four major initiatives:
- Review media assets and sell off those not essential to Meredith’s core business
- Improve advertising and circulation of Time Inc. properties
- Grow revenue and increase profits
- Consolidate operations to save between $400 million and $500 million in the first two years
Meredith president and CEO Tom Harty commented on the company’s plan in a March 21 news release:
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‘We have made significant progress executing on these initiatives since we closed on the acquisition just six weeks ago,’ Harty said.
‘For example, today we are announcing we have completed our portfolio review and decided to explore the sale of the TIME, Sports Illustrated, Fortune, and Money brands. These are attractive properties with strong consumer reach. However, they have different target audiences and advertising bases, and we believe each brand is better suited for success with a new owner. We are pleased with the inbound interest we have received, and we are confident these brands will be positioned for growth with an owner that shares Meredith’s respect for editorial integrity and independence,’ Harty added.
And now the fine print. As part of the company’s consolidation efforts, Meredith told 200 employees their jobs will be eliminated now. Over the next 10 months, another 1,000 positions will also be cut. Six hundred of these job reductions will occur in subscription fulfillment operations as the company moves to a less expensive vendor. These job cuts do not include any that will occur as Meredith sells off magazines like TIME and Sports Illustrated.
These job reductions are part of the $400 million to $500 million in operational efficiencies Meredith anticipated from the acquisition. It plans to eliminate duplicate positions and consolidate operations at its Des Moines, Iowa headquarters where costs are lower than in New York City where Time Inc. is based.
In addition, Meredith will share details of a new ‘brand-centered sales organization and go-to-market strategy’ with staffers on March 28. According to the news release, this new strategy will take full advantage of the company’s expanded media assets and extended audience reach. Meredith’s National Media Group reaches 175 million unduplicated U.S. consumers each month, including 80 percent of millennial women. Meredith brands include Parents, Better Homes & Gardens, Family Circle, Martha Stewart Living, InStyle, Entertainment Weekly and Shape magazine. Its Local Media Group includes 17 TV stations, reaching more than 11 percent of U.S. households.
This news comes just two days after Meredith finalized the sale of Time Inc. UK to private equity firm Epiris. The sale was in progress when Meredith acquired Time Inc. UK on January 31, 2018. Time Inc. UK’s portfolio includes more than 50 popular brands, including Country Life, What’s on TV, Woman’s Weekly and Wallpaper.
Meredith also announced two promotions. Klarn DePalma has been promoted to executive vice president of MNI Targeted Media Inc. DePalma will be responsible for the company’s targeted digital and print ad business. Prior to this position, DePalma oversaw the national sales teams for Meredith’s Local Media Group. Meredith also promoted Dana Neves to the position of vice president and general manager at WFSB-TV, Channel 3, a CBS affiliate serving Hartford/New Haven, Connecticut.
Considering that Meredith Corporation’s target demographic is women, particularly millennial women, the acquisition of Time Inc. and its associated media properties is an interesting deal for Meredith, and it raises a lot of questions. Why would a major media corporation focused on a female audience buy magazines that don’t reach its target demographic and that the company plans to immediately divest?
Is the company really hoping to extend its reach, or does it have another purpose in mind – profiting on the divesture of Time Inc. assets? Using the acquisition as an excuse for major consolidation and cost cutting measures? Or was it just a really savvy business move that is too complex to boil down to a few questions?
Investors seem to be confused too. On January 31, the day the Time Inc. deal closed, Meredith stock was valued at $66.14 per share, and it has continued to drop ever since. As of 4:54 p.m. EDT, Meredith stock was valued at $52.75 per share. How low will it go?