Meredith May Buy Time Inc. with $600 Million in Backing from Koch Brothers

A deal could close as early as next week.

Subscription News: Meredith May Buy Time Inc. with $600 Million in Backing from Koch Brothers

Source: Meredith

With $600 million in backing from the Koch brothers, Meredith Corporation is making a third bid to acquire Time Inc., reports The New York Times. Meredith (NYSE: MDP), publisher of Eating Well, Allrecipes, Family Circle and Shape magazines, tried to buy Time Inc. earlier this year, but couldn't arrange the needed financing for an acquisition. The Koch brothers' infusion of cash, plus $3 billion in financing from Citibank, Barclays, Credit Suisse and Royal Bank of Canada, could help seal the deal as early as next week, says The Times. The deal would likely include all of Time Inc.'s properties, though the status of some pending sales of Time Inc. magazines is not clear.

Subscription News: Meredith May Buy Time Inc. with $600 Million in Backing from Koch Brothers

Source: Time Inc.

Time Inc. (NYSE: TIME), the publisher of Time, Life, Cooking Light, Money, Sports Illustrated and People, has been in financial trouble for some time, and earlier this year, media outlets speculated the company was up for sale. In May, however, Time Inc. said it was not for sale and would pursue its own strategic plan to transform itself instead.

‘Time Inc. is a reinvigorated company uniquely positioned to succeed in the multi-platform media marketplace with an exceptional set of brands and assets, tremendous scale and significant untapped potential. The company is better positioned to capitalize on this potential with its recent shift from a siloed, legacy publishing structure, to an integrated, enterprise platform structure. We are excited to execute on our plan as we have become a leader in digital and remain #1 in print ad revenue share. In addition, our transformation has brought a number of potential partners interested in working with us to unlock and accelerate value across our portfolio of brands,' said Rich Battista, Time Inc. president and CEO.

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Subscription News: Meredith May Buy Time Inc. with $600 Million in Backing from Koch Brothers

Source: Time Inc.

In June, the company cut 300 jobs as part of its restructuring, blaming ‘public speculation' for declines in the first quarter. Perhaps that speculation wasn't so off base. Despite those job cuts, in August, Time Inc. announced its strategic transformation plan which included cutting more than $400 million in costs and implementing new initiatives over the next 18 months. The cost cutting measures included consolidating and centralizing circulation and editorial operations, reviewing pricing, offering new products to expand revenue opportunities, and potentially divest itself of Time Inc. UK, Time Customer Service, a majority stake in Essence, Sunset, Coastal Living and Golf magazines.

While Time Inc. has been working on cost reduction, it has already implemented several new product offerings. This summer Time Inc. launched PetHero, a discount membership program for dog and cat owners, and in October, the company launched People Perks, a membership program for People magazine readers that offers members exclusive discounts on entertainment, style, food, beauty, pets, home and shopping products and access to unique celebrity and red carpet experiences. Last week we reported on Time Inc.'s latest venture – Sports Illustrated TV, the company's second streaming video on demand service.

News of a possible acquistion has peaked the interest of Meredith investors. The New York Times wrote about a possible deal on November 15. On that date, Meredith stock closed at $54.25 per share. On November 17, stock had risen to $60.90 per share.

Subscription News: Meredith May Buy Time Inc. with $600 Million in Backing from Koch Brothers

Source: Google Finance

Insider Take:

Though Time Inc. has been trying to turn things around with cost cutting measures, property divestures and new revenue streams, an acquisition may be the company's best bet to get out from under financial losses and to allow its publications to flourish. Time Inc. has not pivoted quickly enough as the media landscape has shifted from print to digital, and the company has resisted or rejected past acquisition offers. Perhaps it is time to admit defeat. Meredith, who seems to be getting media right, is perfectly poised to rescue Time Inc. while boosting its own portfolio.