Time Inc sees opportunity in ‘smaller deals’

Provided exclusively by Mergermarket

Time Inc (NYSE:TIME), the New York City-based media company, is focused mainly on modest acquisitions, though it would also consider a sizeable deal, according to CEO Joseph Ripp.

During the Q&A session on Thursday’s (7 May) 1Q15 earnings call, the CEO was asked about Time’s appetite for large acquisitions, with the analyst noting market pressure for a merger and citing Meredith Corporation’s (NYSE:MDP) magazines business as an example.

Ripp said there were a lot of possible benefits from consolidation within its shrinking industry, noting that it was the largest player. However, he said the company would be extremely disciplined and focus on return-on-invested-capital.

“Should something come on the market of scale that we think is attractive, we’ll certainly look at it and make a decision,” the CEO continued, adding that it had successfully reduced costs and was now growing its 2013 purchase of American Express Publishing Corporation.

Ripp said while Time did not comment on specific transactions, it would support its growth plans with acquisitions when they presented an attractive risk-reward profile.

“There are things that we are looking at right now … many people are talking to us about opportunities,” the CEO said.

He noted that the market was generally overpriced, with many businesses asking “ridiculous” multiples.

“While we will look at large transactions, I actually think the greater opportunity for us right now is in some of the smaller deals that we’ll be looking at going forward,” Ripp concluded.

A report by this news service in February said Des Moines, Iowa-based Meredith, owner of 17 television stations and publisher of Better Homes & Gardens magazine, was not considering a spin-off of its magazine business. The report, citing Meredith’s Chief Development Officer and General Counsel John Zieser, said the company would be opportunistic as it considered further magazine acquisitions following its January announcement that it would acquire the Shape brand from American Media.

In report by this news service in July last year, Meredith said it would consider buying a number of magazines from Time following the latter’s spin-off from New York City-based media and entertainment group Time Warner (NYSE:TWX). The spin-off occurred in May that year. The article noted that Time Warner had been in negotiations to sell most of Time’s magazines to Meredith prior to opting for a spin-off in March 2013.

Separately, in his prepared remarks on Thursday’s call, Ripp noted that Time announced earlier Thursday that it had placed its principal executive offices in the UK, the Blue Fin building, for sale. Asked to comment on the planned sale, CFO Jeff Bairstow said Time was “excited” about the state of the London market and hoped to soon find out the total value of the planned transaction.

Time’s brands include People, Sports Illustrated, InStyle, Time, Entertainment Weekly and Cooking Light. It also provides content marketing, local print and digital advertising programs, branded book publishing, and marketing and support services.

The company has made a number of small deals since the spin-off from Time Warner, including a strategic investment in online social commerce marketplace Keaton Row and the acquisition of Cozi, a provider of mobile and digital family life organizing tools, for USD 14m. In 2013, Time bought lifestyle magazines publisher American Express Publishing for an undisclosed sum.

Cravath, Swaine & Moore was used by Time for multiple acquisitions prior to its separation from Time Warner, which used the law firm for the spin-off. Mintz Levin Cohn Ferris Glovsky & Popeo was used for Cozi, while Gibson, Dunn & Crutcher advised on the American Express Publishing deal.

Financial advisory matters are typically handled in-house, according to the Mergermarket M&A database.

On the call, Time reported cash at quarter end of USD 458m and net debt of USD 936m. The company has a market capitalization of USD 2.3bn.

Source: Conference Call/Enhanced Content
Value: GBP 1,512m (Time’s market cap)
Stake Value: more than 30% inclusive

As seen in the mergermarket newsletter on 08/05/2015

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