Significant layoffs are rumored to hit Us Weekly early next week, insiders told WWD. American Media Inc. last week closed on a deal to buy the celebrity tabloid for a reported $100 million from Wenner Media.
Employees have not been given an official timetable, and there has been scant communication in terms of what to expect but the word around the office is that layoffs are expected next Tuesday. For now, “It’s just waiting,” a source said.
AMI declined to comment on a timetable.
Immediately following the announcement of the sale, panicked staffers began meeting with AMI top brass to reapply for their jobs. According to an insider, some staffers were asked to “throw others under the bus,” while others were questioned about work flow and the process of reporting and posting stories.
But according to a source familiar with the deal, the meetings were little more than a formality. AMI already had a list of the 15 staffers who will stay on — meaning that around 100 will be let go, according the source. Employees from ad sales and digital editorial will make the move down to AMI’s offices, according to another source, but there are no plans in place to move the print staff. Insiders speculate that editor in chief Michael Steele would be let go.
Many of the team responsible for operations will likewise be laid off as AMI plans to combine their roles with the current staff of their tabloid stable such as The National Enquirer, Star, OK! and Radar Online.
“Layoffs will be a bloodbath,” the source said. “And for those they do keep, there will be a huge culture clash.”
And that culture starts at the top. A source with knowledge of Wenner chairman and chief executive Jann Wenner and AMI’s chairman and chief executive officer David Pecker pointed to managerial differences.
“Jann is not a perfect manager. He uses fear and pressure as a tool. You need to use it…but he believed in great work and he encouraged people to do great work,” the source said. “David Pecker comes across as a guy who sets goals and roasts people for not meeting them.”
While that assessment is up for debate, Pecker is known for serious cost cuts and running a lean ship. AMI already has a centralized news structure and a consolidated back office. In January, the company consolidated the staff of Men’s Fitness and Muscle & Fitness. The changes translated to about 16 layoffs, the bulk of which came from the editorial staff of Men’s Fitness, as well as the departure of Dave Zinczencko, executive vice president and editorial director. In recent months, AMI’s name had been linked as a potential suitor to buy Jared Kushner’s New York Observer in addition to Us Weekly, despite the fact it had been trying to unload Men’s Fitness to Rodale a year earlier. Rodale had also been approached to buy Wenner’s fitness glossy, Men’s Journal, a source told WWD.
Us Weekly had also been shopped to Hearst Magazines by Wenner, which needed the money to pay off what Moody’s Investors Service estimated to be a $49 million outstanding term loan and a $15 million undrawn revolver. Wenner’s debt was related to debt it incurred when it bought back a 50 percent stake in Us Weekly for a reported $300 million from the Walt Disney Co. Wenner has also been saddled with legal fees related to the defamation suit it lost over a widely condemned 2014 article, “Rape on Campus” in Rolling Stone. To drum up funds, Wenner sold a 49 percent stake in Rolling Stone to BandLab Technologies.
But back to AMI, which isn’t without heavy debt of its own.
According to its 10-K from last March, AMI at that time carried $393.9 million of outstanding indebtedness, consisting of $378.7 million of senior secured notes and $15.2 million under a revolving credit facility. But last August, AMI refinanced its capital structure, allowing it to reduce its annual cash interest expense by $20 million and extend the maturity on the debt through 2022.
An AMI spokesperson said, “As a result of our capital restructuring last year, the equity holders are now also the bond holders, therefore any decisions regarding debt payments resides solely at their discretion.”
AMI’s equity holders are Omega Partners, Chatham Asset Management and Pecker.
Pecker said at the time of the refinancing that it would give the company the liquidity and free cash flow to make strategic acquisitions.
And clearly it has.