Media conglomerate Primedia said Monday that it plans to acquire rival publisher Emap USA in a $515 million cash-and-stock deal that will create the second-largest consumer magazine company in the U.S., according to the company.
The deal will combine Emap USA's 60 consumer publications - which include Teen and Motor Trend - five TV shows, Web sites and live consumer events with Primedia's 230 titles. Primedia publishes a broad range of magazines that include well-known consumer titles Seventeen and New York along with hundreds of niche titles such as Hog Farmer, Sport Compact Car and Arabian Horse World.
The acquisition will also provide an immediate boost to one of the company's strongest niche areas: automotive publications. Emap USA publishes Hot Rod and Motor Trend, and will join Primedia's acclaimed Automobile magazine. Emap's automotive sites will now be collapsed into Primedia's Gr8Ride.com, its automotive enthusiast portal.
Emap will retain ownership of the American edition of FHM, a men's magazine competitor to category leader Maxim.
Primedia plans to pay $505 million in cash and warrants on 2 million of its shares for Emap. Merrill Lynch values the warrants at $10 million. The deal will be financed through a loan from buyout firm Kohlberg Kravis Roberts, which owns more than 80 percent of Primedia, and through the sale of "noncore" assets, amounting to an estimated $250 million. Rogers declined to name which assets will be divested. In addition, some Emap assets may be divested, but they have not been determined, Rogers said. "We plan to sell down a limited number of Emap properties being acquired here because they don't have the fit and multimedia value that some of the others do."
The deal has yet to undergo regulatory hurdles and is expected to close by the third quarter of this year.
The deal marks the end of British publisher Emap's expensive and painful foray into the U.S. market. The British publisher paid $1.2 billion and $300 million in debt in 1999 to acquire the assets of what was formerly known as Petersen Publishing. Petersen was founded by Californian Robert Petersen with Hot Rod magazine in 1948.
For Primedia, the acquisition was a long time coming. Before Emap's purchase of Petersen, Primedia also bid on the company. Primedia managed to pick up the company at a deep discount - a pleasant change of situation for the Primedia, which was criticized for overpaying on the purchase of About.com in November. The deal happened just before the value of Internet companies plummeted.
How smoothly Primedia will be able to integrate the new properties as it struggles to massage newly acquired units into its shifting infrastructure remains an open question.
Wall Street seemed enthused by the deal, sending shares of the beleaguered Primedia up 6.77 percent, up 46 cents to $7.25. Emap shares also got a boost, gaining 3.93 percent up 27.5 pence (39 cents) to 727.50 pence on the London Stock Exchange.
