"AMI's strategy going forward will focus on our celebrity weeklies and active lifestyle magazines," said David J. Pecker, chairman-CEO, in a statement. "As part of this strategic refocus, we have decided to explore divestiture options for our five special-interest titles."
That is probably welcome news to bondholders, who hold some $550 million of American Media debt and have been pressuring the company to straighten out and strengthen its balance sheet. After American Media didn't file its third-quarter results as required, due to an ongoing audit, they forced the company into a March 17 deal with incentives to lower its leverage. And now the company faces the prospect of needing to fund a big raise for Editorial Director Bonnie Fuller, whose contract expires at the end of the month.
Hoping for $300 Million
The books going on the block, in an auction being handled by J.P. Morgan Securities and Bear Stearns, are Muscle & Fitness, Flex, Muscle & Fitness Hers, Country Weekly and Mira. An article in The Wall Street Journal, which first reported the sale effort in this morning's edition, said the company hopes they will fetch some $300 million or more.
But it may not be that easy. "It would be remarkable to get 10 to 13 times operating income, since no one else is getting those prices," said Mark M. Edmiston, managing director, AdMedia Partners, the investment banking and advisory firm that focuses on the publishing, advertising and interactive businesses. "And some of these titles are certainly not top-of-mind, like Country Weekly and Mira."
Muscle & Fitness is a very solid property with valuable flanking products in Flex and Muscle & Fitness Hers, Mr. Edmiston said. "The question that anybody would have is who's going to buy them?" he added. "That's the harder question."
The titles may also struggle to attract private-equity investors who like to slash costs to increase profits -- precisely because Mr. Pecker is known as an executive who cuts costs, meaning there probably isn't much fat to trim.
Ad pages increase at 'Muscle & Fitness'
Ad pages at Muscle & Fitness, acquired when American Media bought Weider Publications in 2003, have grown lately even as a big category, dietary supplements, has come under increased federal scrutiny. Ad pages grew 5.5% last year and surged 39.6% from January through May, according to the Publishers Information Bureau. But the bureau doesn't track the other Weider books now back on the block, Flex and Muscle& Fitness Hers.
Ad pages at Country Living edged up 0.9% in 2005 and grew 8.3% from January through May, compared to the equivalent five months last year.
Titles not in play are Star, Shape, Fit Pregnancy, Natural Health, Looking Good Now, National Enquirer, Weekly World News, Men's Fitness, Sun, Globe, Weekly World News and the National Examiner.