Morningstar founder reportedly agrees to buy 'Inc.,' 'Fast Company'

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Joseph Mansueto, founder of the Chicago-based investment research firm Morningstar, has reached a tentative agreement to acquire Inc. and Fast Company from Gruner + Jahr USA, according to people familiar with the matter.

"It’s a done deal," said one source, who expected an official announcement this week.

The price is said to be between $35 million and $40 million, and Mansueto, Morningstar’s chairman-CEO, who has an ownership stake in Time Out Chicago, was said to outbid the Economist Group, which publishes The Economist and CFO, for the two titles.

An influential factor in Mansueto’s bid was his willingness to keep Fast Company open, when most other bidders planned to shutter the struggling magazine, insiders said.

"It’s a plus that 40 people won’t be losing their jobs right away," one source acknowledged.

Fast Company lost about $8 million last year, according to people familiar with the matter. Through the first five months of this year, the magazine’s ad pages fell 15.4%, according to Publishers Information Bureau figures.

Inc. was said to have posted "contribution" of about $4 million in 2004. Through May of this year, the magazine’s ad pages declined 7.2%, according to PIB.

The bidders who planned to shutter Fast Company did not factor the publication in their long-term financial calculations regarding the deal. Setting Fast Company aside, these bidders viewed a $40 million price tag for the publications as roughly equivalent to a 10 times EBITDA (earnings before interest, taxes, depreciation and amortization) multiple on Inc.’s $4 million in contribution.
That multiple proved too rich for most of the bidders, especially considering Inc. is struggling to maintain ad pages and the general business magazine market is also sputtering, at least when it comes to print pages.

With the exception of Business 2.0, the major general business magazines—BusinessWeek, The Economist, Forbes and Fortune—have all lost ad pages year-to-date this year. Many of these magazines have print ad revenue that is about half of what it was at the height of the dot-com frenzy. "Either they all got stupid together or it was a market issue," said one bidder who dropped out.
The apparent sale of Inc. and Fast Company marks the last chapter in G+J USA and parent company Bertelsmann AG’s foray in the U.S. magazine business.

The estimated sale figure of $35 million to $40 million is significantly below the reported $565 million the company paid for the two magazines—$200 million for Inc. and $365 million for Fast Company.

G+J agreed to sell its consumer titles, including Parents, to Meredith Corp. last month.

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