Time Warner in Talks to Sell Most of Time Inc.

Meredith Emerging as the Likely Potential Buyer

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Time Warner is in talks to sell a large portion of its Time Inc. magazine division, including People, InStyle and Real Simple, according to a report Wednesday afternoon by Fortune.

Headed for Meredith, Berkshire Hathaway or nowhere new after all?
Headed for Meredith, Berkshire Hathaway or nowhere new after all?

Fortune is itself a Time Inc. magazine but reported that it isn't part of the deal being discussed. Neither is the flagship Time or Sports Illustrated, Fortune said. People is a huge profit center and the crown jewel in the portfolio.

A spokesman for Time Warner declined to comment. Spokeswomen for Time Inc. and BDT Capital Partners, a bank reportedly involved in the talks, did not immediately return calls.

Speculation immediately turned to the identity of the potential "serious buyer" mentioned but not named in the article. Former Time Warner CEO Dick Parsons once told a "town hall" meeting of 400 staffers about a conversation he'd had with Warren Buffett.

"As your friend, don't do that, it's a good business," said Mr. Buffett, according to people who heard Mr. Parsons tell the story. "But," he added, "if you do sell it, sell it to me."

A media investment banker, however, argued that getting Time Warner to sell its magazine portfolio in pieces would probably require a little extra incentive -- while Mr. Buffett tends to look for bargains. "These are the premier brands in the world in magazine publishing, and to split them up is surprising," said Reed Phillips, CEO at DeSilva & Phillips. "I would've thought they would've wanted to sell all the properties together to get the highest possible price. What I'm guessing is the buyer who's approached them is selective about the titles they want, and they don't wan the mens' titles."

"I'm thinking there's a high premium for this or they wouldn't break it up," Mr. Phillips added, "whereas Buffet tends to buy on value, and that's certainly what he's been doing with the newspapers."

Reached by phone, a representative for Mr. Buffett's Berkshire Hathaway asked to receive questions by email but did not immediately reply.

As the afternoon progressed on Tuesday, another magazine company, Meredith, seemed to emerge as the potential buyer, with reports by The New York Times and Wall Street Journal to that effect. A spokesman for Meredith, the publisher of magazines such as Ladies' Home Journal, declined to comment.

Although Meredith, with a market capitalization of $1.6 billion, might have trouble with the transaction being considered, which back-of-the-envelope calculations easily put north of $2 billion, investment bankers and others soon speculated that private equity investors were helping the company's play.

Time Inc. has been the subject of spin-off and sale rumors for years as its results have lagged Time Warner's more lucrative TV and movie entertainment businesses, and Time Warner CEO Jeffrey Bewkes has never taken the option off the table, but no deal has come of it yet. Time Inc. CEO Laura Lang, who arrived from digital agency Digitas a little over a year ago, has been trying to improve the publishing operation's results with an initial review to identify priorities, helped by Bain consultants; new digital ad products and a new emphasis on video; and layoffs last month of about 500 employees.

Mr. Buffett has dabbled in media for some time, though all his bets have been on local newspaper, not magazines. He purchased the Buffalo Evening News in 1977 and added the Omaha World-Herald in late 2011. Last year, Berkshire Hathaway subsidiary BH Media Group bought the bulk of Media General's newspaper division for $142 million, leading The Wall Street Journal to speculate on whether Mr. Buffett was "a budding media mogul."

Indeed Mr. Buffett fueled that sense with a letter to the editors and publishers of his new holdings promising more newspaper purchases. Later that month, he made good on that prediction with the purchase of the Greensboro (N.C.) News & Record.

Mr. Buffett has often contributed his business insights to Fortune and has long known Fortune Editor at Large Carol Loomis, who has often interviewed him. Last year, she compiled his Fortune wisdom into a book called "Tap Dancing to Work."

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