The deal, Meredith's first in the consumer magazine space since purchasing Ladies' Homes Journal in 1986, broadens the breadth of the Des Moines, Iowa-based company's publishing unit. Stephen Lacy, president of Meredith's Publishing Group, painted the deal as part of the company's strategy to woo younger readers, such as "women in the very early stages of family formation."
Other moves by Meredith to reach that demographic include the creation of Living Room, a younger-skewing shelter title that just distributed its third test issue, with a fourth expected in late spring or early summer of next year. The company had earlier announced plans to publish books based on TLC Channel's Trading Spaces home-decorating show, in which neighbors are given $1,000 and the services of designers to redo a room in each other's homes.
American Baby Group, which includes American Baby, Childbirth and First Year of Life in addition to Spanish-language and online offshoots, this year is expected to take in about $50 million in revenues. In its last fiscal year, which ended June 30, Meredith's magazine group posted revenues of $733.2 million. American Baby is expected to post EBITDA -- earnings before interest, taxes, depreciation and amortization -- of $9.3 million for calendar 2002. Meredith valued the deal as approximately 10 times the unit's projected EBITDA in calendar 2003.
The deal also marks the
Primedia is the parent of Seventeen, Folio: and Soap Opera Digest, among other titles.
The company said the Meredith deal reduced its long-term debt load to around $1.75 billion. Thanks to those deals and some accounting changes, in its most recent quarter the company last week reported net income of $14.4 million, compared with a loss of $277.8 million a year ago. (But after factoring out discontinued operations and gains for asset sales, the company showed a net loss of $12.2 million.)
The quarter was the company's first positive period in years and only the third since it went public, Primedia Chairman Tom Rogers said last week.
Meanwhile, Meredith's move comes as one of its key franchises, Ladies' Home Journal, shows signs of slipping. Through September, the title's as pages were off 1.2%, but its ad pages had declined for the last three years running -- even during the industry's boom years of 1999 and 2000. Its newsstand sales were off 8.4% for the first six months of 2002, according to the Audit Bureau of Circulations.
Mr. Lacy said Meredith had begun discussing a possible deal for American Baby in September. Previously, said executives familiar the matter, Gruner & Jahr USA Publishing, which owns Child and Parents, had talks with Primedia over a potential deal for American Baby. A G&J spokeswoman declined to comment on that scenario.