If 2017 was the year of big media mergers and acquisitions, 2018 will be when the dust from deals settles and the actual work of merging begins.
Take Meredith and Time Inc. After some false starts over the years, most notably in 2013, Midwestern publisher Meredith (with the help of the Koch brothers) finally snagged Time Inc., following the New York-based firm’s lengthy flirtation with a possible sale.
Time Inc. said last April that it was taking itself off the market or, in corporate parlance, had decided against pursuing an exploration of a sale (or, more to the point, failed to get an offer it deemed high enough to accept) . In November, the companies revealed that Meredith was buying Time Inc. in a $2.8 billion cash deal. The price covered Time Inc.’s debt and the agreement included a $650 million infusion from Koch Equity Development, the investment arm of Koch Industries.
“Meredith presented us with an opportunity to combine companies to create even greater scale and financial flexibility. Scale matters and will enable the enterprise to compete more effectively in this dynamic media landscape, enhancing the enormous, exciting potential of our brands,” Time Inc. chief executive officer Rich Battista wrote in a rather matter-of-fact note to staff at the time.
What was once viewed as a potential culture clash — between high-flying, Manhattan-based Time Inc. and the Midwestern publisher of titles like Family Circle — seemed more pragmatic as Time Inc.’s budgets shrank and expense accounts dwindled.
But differences of geography were still a matter of contention.
“Time Inc. has done actually a very nice job moving a lot of support functions to India, and we really have not. We also have the New York versus Des Moines cost structure benefits. So inherent in a lot of these, you’ve got geographical differences as well,” chief financial officer Joseph Ceryanec told investors when the deal was unveiled in November.
Meanwhile, Time Inc.’s lease of its 700,000-square-foot headquarters in downtown Manhattan’s Brookfield Place isn’t set to expire until 2032, although Meredith ceo Stephen Lacy did note that Meredith has “a very attractive under-market, if you will, lease in midtown” for space that the company occupies.
Perhaps Time Inc. staffers may end up heading back uptown — presuming that Meredith is able to wiggle out of the Brookfield Place lease.
Meanwhile, Meredith’s first order of business is rumored to be scrapping the name Time Inc., save for the title of the namesake magazine (Time Inc. declined to comment on the rumor).
Meredith said it expects to generate “cost synergies” of $400 million to $500 million in the first two full years of operations, savings that will come from “eliminating duplicative functions,” cutting down on real estate and vendor contracts, and combining circulation and fulfillment initiatives.
Another area of cuts will come from selling off several titles, including Essence, Golf and Sunset, an initiative that was in the works prior to the Meredith deal. Meredith, very benevolently, said in a phone call with investors following the announcement of the deal that it would allow Time Inc. to go ahead with those sales.
“Time has publicly reported that they have some assets that are currently for sale: Time U.K., Golf magazine, Sunset and Essence. And we’re going to allow Time Inc. during this — before the close period — to go for it and consummate those transactions, and we think that they’ll have those done by the end of the calendar year,” Meredith’s chief operating officer Thomas Harty said.
Immediately following the sale, Time Inc. did successfully consummate a transaction to sell Sunset magazine to Regent LP, a Los Angeles-based private equity firm. On Wednesday, Time Inc. said that it had also found a buyer for Essence magazine — Richelieu Dennis, an entrepreneur and founder of Sundial Brands, a leading skin-care and health-care manufacturer, formed Essence Ventures LLC to buy the African-American-centric title.