Magazine publisher and broadcast company Meredith Corp. is acquiring Time Inc. in a deal valued at $2.8 billion as it seeks to adapt to the publishing industry’s challenge of migrating from print to the digital age.
The Des Moines-based company said Sunday it would pay $18.50 a share for New York-based Time Inc., the publishing company that owns the marquee magazines Time, Fortune and Sports Illustrated.
The deal — which includes $1.85 billion in cash and the assumption of debt — had been approved by both firms’ boards of directors and is expected to close in the first quarter in 2018.
Time Inc.’s stock jumped 9% to $18.48 a share in trading Monday in response to the deal, and Meredith’s stock shot up 11% to $67.85 a share.
The transaction received financial backing from the billionaire Koch brothers. Meredith said it secured $650 million from Koch Equity Development, the investment arm of Koch Industries, but the publisher said Koch Equity Development would not have a seat on the Meredith board and “will have no influence on Meredith’s editorial or managerial operations.”
After speculation of the deal began to bubble, media experts questioned whether the Koch brothers would use Time’s storied publications to promote their brand of conservative politics.
In a conference call with analysts Monday, Meredith Chairman and Chief Executive Stephen Lacy reiterated that the Koch brothers would not demand any control despite their hefty investment.
“Their desire to be passive and not require a board seat,” along with the financial terms of their investment, “without a doubt made the offer” from the Koch brothers “the most attractive” in terms of financing support available for the merger, Lacy said.
Rich Battista, who has been Time Inc.’s president and chief executive for only slightly more than a year, will leave the publisher after helping Meredith’s management with the transition, Time Inc. said.
“On behalf of the entire board, I thank Rich Battista for his strong and exemplary leadership,” Time Inc. Chairman John Fahey said in a statement.
Fahey said Time Inc.’s employees had made “significant progress transforming one of the world’s most iconic and historically significant publishing companies into a leading multi-platform media enterprise.”
But Fahey also said Meredith’s offer was “in the best interests of the company and its shareholders.”
This would not be the first merger talks for the two companies. They have had several rounds of negotiations in recent years, but no deal emerged until now.
Meredith’s best-known brands include Family Circle and Better Homes and Gardens. In addition to Time magazine, Time Inc. also publishes Entertainment Weekly and People.
Like all traditional print publishers, both Time Inc. and Meredith have struggled to replace shrinking print ad revenue.
Time Inc., which was spun off from Time Warner Inc. in 2014, has been hard hit as more readers migrate to digital platforms.
In the first nine months of the year, Time Inc.’s revenue dropped 9% to $2 billion, compared with a year earlier.
Lacy told the analysts that Time’s addition would give Meredith the scale and broad lineup of media properties to prosper as the industry migrates from the printed page to digital readership.
Meredith, which also has 17 television stations, will use the deal to become “a premier media and marketing company with an unparalleled portfolio of national media brands along with a highly profitable local-television business,” Lacy said.
The company said it also would have “leading positions in celebrity, food, lifestyle, news and sports, parenting and home content creation.”
Tom Harty, Meredith’s president and chief operating officer, told the analysts that the combined size of Meredith and Time and their popular magazine titles would be an advantage in gaining advertisers’ dollars.
“More and more marketers and agencies are consolidating budgets with partners who have the scale, trusted brands and ability to deliver [an] improved return on ad spend,” Harty said.
That’s one reason why media analyst Tuna Amobi of CFRA Research raised his rating on Meredith’s stock to “buy” from “hold” Monday and called the deal “transformative” for Meredith.
“Having so many assets in different areas of publishing gives them the ability to propose more solutions to advertisers,” Amobi said, adding that Time Inc. also is “farther along in terms of the online modernization of its content than Meredith.”