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overview
holdings
landmarks
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overview
This
profile considers Primedia, a leading (albeit ailing)
US magazine publisher that expanded into commercial education
services (Channel One) and a variety of web sites.
It covers -
introduction
As of 2001 Primedia claimed to be the largest special-interest
magazine publisher in the US and the second largest magazine
publisher per se.
Sales in 2000 were around US$1.7 billion, with assets
of US$3 billion and debt of US$2.6bn in 2001. By 2002
those figures had worsened to sales of around US$1.5 billion,
income of around minus US$0.6 billion, debt of US$2.5
billion and shareholder equity of minus US$0.6 billion.
Continuing difficulties were reflected in sale of key
assets such as Seventeen.
At its peak it encompassed over 300 titles, ranging from
Seventeen (acquired from Murdoch
and sold to Hearst) to American
Baby and American Demographics. More questionably,
it claimed to be the number one "news and information
group on the Internet", with over 1,000 special-interest
sites.
It has had little success as a distributor or creator
of video content, primarily the Channel One commercial
television service for secondary schools developed by
Chris Whittle of crashed-&-burned Whittle Communications
and the grandiose Edison
Project.
The group is an assemblage of bits and pieces from
other empires, for example remnants of the Cowles
Media group, magazines such as Seventeen offloaded
by Murdoch's News group in 1991
and Cahners titles from Elsevier.
It was established under the auspices of junk bond specialist
Kohlberg Kravis & Roberts (KKR), which later acquired
Scandinavian broadcaster SBS in
alliance with Permira. KKR is a competitor of Hicks Muse
Tate & Furst (HMTF), responsible for Capstar/Chancellor
(now part of Clear Channel) and
LIN TV.
In December 2001 Advertising Age suggested
that "Primedia is the Poster Child for Media's Future".
In April 2003 the New York Times quipped that
In
fall 2000, Primedia acquired About.com, a collection
of special-interest Web sites for $690 million in stock.
Primedia instantly received a dot-com valuation, though
not in the way it had hoped. Its stock fell 25 percent
the day the deal was announced and has dropped further
since — to a low of 76 cents a share last year
from a high of more than $34.
The
following page provides an
indication of Primedia holdings.
history
Primedia traces its origins to establishment in 1989 of
K-III Holdings under the auspices of junk bond financiers
Kohlberg, Kravis, Roberts (KKR).
KKR and Macmillan Inc. executive William F. Reilly had
failed to gain control of that publisher, which was instead
acquired by Robert Maxwell and
dismantled. In 1989 K-III paid US$143 million for Macmillan
Inc's Direct Marketing Group, which included Macmillan
Book Clubs (rebadged as Newbridge Book Clubs) and Gryphon
Editions, along with technical magazine publisher Intertec
Publishing Corp. for US$167 million. During the following
year it acquired purchased auto industry publisher Ward's
Communications from Thomson,
Field Limited Partnership and Funk & Wagnalls for
about US$200 million and book club group Reader's Garden
Inc.
In 1991 it was renamed K-III Communications. It paid Murdoch's
News US$650 million for Soap Opera Digest, New
Woman, Seventeen, Premiere, New
York, Daily Racing Form and two other magazines.
It then acquired Krames Communications (publisher of pamphlets
distributed by doctors to patients) from Hachette,
Musical America Publishing and Films for the Humanities
Inc. During 1993 it absorbed the Pharos Books division
of United Media, Nelson Publications and three trade journals
from Wiesner, Inc. Its titles thus extended from horse
racing guides to directories for corporate pilots, the
Funk & Wagnalls encyclopaedia and Soybean Digest.
Losses for that year were US$86 million on sales of US$844
million, dispelling claims that KKR had a magic touch.
In 1994 it acquired Katharine Gibbs Schools Inc. from
Phillips Colleges. Macmillan had sold the chain of seven
secretarial schools to Phillips in 1989. The spree continued
with purchase of Channel One Communications from Whittle
Communications L.P. for about US$250 million, Haas Publishing
Companies, Stagebill and interests as diverse
as child development products from Gruner
+ Jahr and publishing about construction industry
equipment.
In 1995 it acquired PJS Publications, the 'shotguns to
cross-stitch' publisher of specialty magazines such as
Sew News, McCall's Needlework and Shooting
Times. It acquired Maclean Hunter's US publications
(including American Printer and Coal)
for US$55 million, unloaded Premiere to Hachette
and New World Communications
for about US$20 million and engulfed McMullen & Yee
Publishing (eg All Chevy and Truckin').
Bacon's Information (PR industry information) and Craftrends
Magazine were bought at that time, along with Chicago
magazine from Landmark.
The company by then was awash in debt, with sales of US$1.05
billion and a loss in 1995 of US$75 million despite an
income tax credit of US$59 million after interest expenses
of US$105 million on US$1.1 billion debt. It went public,
with fund raising of US$141 million being absorbed in
purchase of 14 magazines (including American Baby,
Sail and Modern Bride) from
Cahners Consumers Magazines.
Despite underwhelming performance by Channel One it paid
US$422 million in 1996 for Westcott Communications, producer
of training programs delivered on tape and by satellite.
Other 1996 acquisitions included Tri-State Publishing
& Communications, Theatre Crafts International,
the news services division of Facts on File Inc., Lighting
Dimensions, Millimeter and Horticulture
magazine. Operating income in that year was US$85 million,
with net income of $8 million after US$125 million interest
payments on US$1.57 billion long-term debt and US$53 million
tax credits. Times Mirror reduced the burden through purchase
of Krames; New Woman was acquired by Rodale Press.
1997 saw the group being renamed Primedia. During the
following year it acquired Cowles Enthusiast & Business
Media (25 enthusiast titles, 11 technical and trade magazines,
15 trade shows) and seven youth entertainment magazines
from Sterling/Macfadden Teen
Network and two from Laufer Publishing, unloading Just
CrossStitch and Woodworker's Journal. That
sale was followed by disposal of its Supplemental Education
Group and pictorial for US$129m. Some transport
and arts publications were shed through an MBO as Commonwealth
Business Media Inc in 2000.
Undeterred, Primedia acquired emap usa (formerly Petersen
Publishing) from EMAP for US$515
million and amid the last frenzy of the dot com bubble
bought About, Inc for US$374m to "supercharge"
Primedia for growth. Analysts were unimpressed: a Deutsche
Bank observer for example argued that Primedia's assets
were worth US$3 billion, not much more than its debt of
US$2.6 billion. Primedia sold Bacon's Information group
to Observer AB for US$105 and began unloading what it
had earlier identified as flagship publications, with
Chicago magazine for example going to Tribune
for US$35 million, Modern Bride magazine group
to Advance for US$52 million,
American Baby Group to Meredith
for US$115 million and Seventeen magazine and
Cover Concepts to Hearst. About.com
was sold to the New York Times
for US$410 million in 2005.
In 2007 Primedia sold its Channel One educational television
business to Alloy Media & Marketing for a reported
US$10 million. Shortly thereafter it announced sale of
Motor Trend, Automobile, Lowrider,
Surfer, Power & Motoryacht, Snowboarder,
Horse & Rider, Hot Rod and 70 other magazines
to Source Interlink Inc - the magazine distributor controlled
by retail magnate Ron Burkle - for US$1.2 billion. Primedia
had 2006 sales of US$524.8 million with an operating profit
last year was US$75.4 million; the 2007 disposals would
leave it debt-free.
Petersen
Petersen Publishing was founded by Robert Einar Petersen
(1926-2007), a former messenger at MGM Studios who published
the first 10,000 copies of Hot Rod in 1948 using
$400 cash and credit from a friendly printer. In 1996
he sold the business to D Claeys Bahrenburg (former president
of Hearst Magazines), Neal C Vitale (former general manager
of Variety) and Willis Stein & Partners for
US$450 million.
Petersen Publishing at that time encompassed 27 regular
monthly magazines and over 30 other titles published on
a sporadic basis, with an aggregate circulation of about
43 million. Titles included Car Craft, Off Road, Guns
& Ammo, Rod & Custom, Snowboarder, Motor Trend,
Hunting & Handgun, Motorcyclist, Skin Diving, Sport
Truck, Circle Track, Sport. Bicycle Guide, Sassy, Photographic
and Tiger Beat.
It went public in 1997, being acquired by EMAP
for £1 billion during the following year and sold
to Primedia in 2001.
studies
There have been no major study of Primedia.
For KKR see Connie Bruck's The Predators' Ball: The Inside
Story of Drexel Burnham & the Rise of the Junk Bond
Raiders (New York: Penguin 1989) and Barbarians at
the Gate: The Fall of RJR Nabisco (New York: HarperBusiness
1991) by Bryan Burrough & John Helyar.
The New Financial Capitalists: Kohlberg Kravis Roberts and
the Creation of Corporate Value (Cambridge: Cambridge
Uni Press 1998) by George Baker & George Smith is an
authorised, laudatory and - to us - unconvincing, study.
It might be read in conjunction with George Anders' Merchants
of Debt: KKR and the Mortgaging of American Business
(New York: Basic Books 1992), superior to Sarah Bartlett's
The Money Machine: How KKR Manufactured Power &
Profits (New York: Warner 1991).
For Channel One and Whittle Communications see Vance Trimble's
unduly sympathetic An Empire Undone: The Wild Rise and
Hard Fall of Chris Whittle (New York: Birch Lane 1995).
Sassy is profiled in How Sassy Changed My Life: A Love
Letter to the Greatest Teen Magazine of All Time (London:
Faber 2007) by Kara Jesella & Marisa Meltzer
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