Time Inc. beat out The New York Times Co. and American Media, both of which bid above the $400 million minimum required of finalists. The sale price is 18.3 times Times Mirror's $25.9 million operating profit for '99, excluding losses from the recently sold Sporting News.
Times Mirror's flagship -- and the title most coveted by bidders -- is Golf Magazine, which historically has accounted for about half of the publishing group's profit. It is expected to be linked for advertisers with Sports Illustrated's targeted "Golf Plus" edition. Other titles include Field & Stream, Outdoor Life and Popular Science.
The deal should close by yearend. Time Inc. said it currently has no plans to relocate the magazines or separate them, although there has been speculation the outdoor titles will eventually move into Time Inc.'s Southern Progress Corp.
KLINGENSMITH OVERSEES TITLES
The Times Mirror properties will report to Sports Illustrated President Michael Klingensmith. Jason Klein, CEO of Times Mirror Magazines, has been asked to stay on to continue running the titles.
Mr. Klein said the deal gives Time Inc., known mostly for its mass-market titles, access to vertical markets. Times Mirror gains "access to a wide range of world-class capabilities, especially in the circulation area," he said.
Several observers expressed surprise at the deal's high price tag.
"I was a little taken aback" at the sale price, said one industry executive, who compared it to the premium-priced $1.5 billion Emap-Petersen deal in January 1999.
American Media, anxious to build scale and reduce its reliance on supermarket tabloids, had expressed a desire to keep the name Times Mirror had it won, said an executive familiar with the bidding.
Rival bidders had been concerned that a management bid backed by New York-based financial player Quadrangle Group might win via a last-look arrangement with Merrill Lynch & Co., which handled the sale. One industry executive said on the day the deal was announced that the management bid "never completely went away, until yesterday."
RELIANCE ON SWEEPSTAKES
Those involved with the bidding process said some Times Mirror titles depended heavily on subscriptions and sweepstakes sales agents such as American Family Publishers, which is getting out of that business.
Time Inc. will also face a challenge on the ad side, given Philip Morris USA's June decision to pull cigarette ads from many magazines. Last year, Philip Morris cigarette ads accounted for 8.5% of Outdoor Life's ad revenue and 7.6% of Field & Stream's, according to an analysis of Competitive Media Reporting and Publishers Information Bureau data.
An industry executive who works for neither company said Time Inc.'s clout could help the Times Mirror titles bulk up their ad volume. When Time Inc. sales executives, armed with Times Mirror's portfolio, "walk into Ford," the executive said, "they'll walk out the door with a percentage of Ford's marketing budget."
The deal is an unusual move for Time Inc., in that it is by far its largest magazine deal since the 1985 purchase of the Southern Progress group. It could signal that a combined America Online-Time Warner will become much more active on the acquisition trail.