Magazine Deal Offers Fast $303-Million Gain
From the Nice-Work-If-You-Can-Get-It Department: The deal struck Wednesday to sell several magazines to a French publisher translates into a whopping $303-million profit in six months.
The purchase of Diamandis Communications and its magazines for $712 million by French magazine publisher Hachette comes only six months after the company was formed by the buyout of the magazine group from CBS.
The $303-million return, which includes earlier asset sales and other gains since the buyout, amounts to a profit of $1,545,918.30 per day since Prudential Insurance and executives of the CBS magazine group closed the deal on Oct. 1.
The agreement represents a personal triumph for Chief Executive Peter G. Diamandis, the 56-year-old former president of the CBS magazine division.
Prudential will reap about $200 million of the profit and more than 50 executives at Diamandis will rake in the rest, Prudential spokesman Scott Peterson said.
“There are a lot of people walking around here with smiles on their faces,” said Phyllis Crawley, spokeswoman for New York-based Diamandis Communications.
“This represents the largest gain we have ever realized in any one transaction,” Peterson said, adding that Prudential is a big player in the world of leveraged buyouts.
“By any standards it would be considered a very successful deal,” he said. “It’s interesting. At the time, people said we were wildly over-paying for something that didn’t have any hard assets.”
In a leveraged buyout, a company is purchased using borrowed funds that are repaid either with cash generated by company operations or by selling pieces of the firm.
The profit “is pretty impressive,” said one investment banker and leveraged buyout veteran.
Diamandis, the father of six children, got his start selling ads for Mademoiselle in 1960 and went on to become publisher of six different magazines before he joined CBS. In 1962, he formed an advertising agency with several friends and sold his stake in 1969 for a reported $500,000.
He then returned to Mademoiselle as its publisher. Diamandis is credited with helping start Self magazine, turning around Women’s Day and shutting down Geo.
Diamandis began selling the 19 magazines owned by CBS within days of the $650-million buyout. Less than three weeks after the purchase, the company agreed to sell Field & Stream, Home Mechanix, Skiing and Yachting magazines to Times Mirror, parent of the Los Angeles Times, for $167.5 million. Three other magazines, including Modern Bride, were sold to other buyers.
