PRIMEDIA TO ACQUIRE EMAP USA
PRIMEDIA to become second largest consumer
magazine publisher in the U.S.
Uniquely synergistic transaction will strengthen
PRIMEDIA's position as the leading targeted
media company in the world
Transaction of $515 million is significantly
accretive to per share value on an EBITDA basis
Cash from selected divestitures and common equity
to fund acquisition will put debt leverage ratios
below current levels
NEW YORK, July 2, 2001 --
PRIMEDIA Inc. (NYSE:PRM) today announced it
has agreed to acquire EMAP USA (formerly known
as Petersen Publishing) from EMAP plc, forming
the second largest magazine company in the U.S.
EMAP USA has more than 60 consumer titles reaching
over 75 million enthusiasts through a combination
of magazines, network and cable television shows,
web sites, and live consumer events. The acquisition,
upon completion, is immediately accretive to
per share value on an EBITDA basis.
Among its well-known titles are Motor Trend,
Hot Rod, Teen, Surfer and Stereophile. The properties
uniquely complement many existing PRIMEDIA products
in key niche markets including automotive, teen,
outdoor, active sports and consumer electronics.
This transaction significantly strengthens PRIMEDIA
in scope and scale in its core traditional media
properties, and enhances the company's position
as the largest targeted media company in the
world with more than 280 consumer and business
to business magazines, in addition to its video
and Internet properties.
Under the terms of the agreement, PRIMEDIA
will pay $515 million for EMAP USA, consisting
of $505 in cash and warrants to purchase 2 million
shares of Primedia at $9 per share that have
been valued by Merrill Lynch at approximately
$10 million. The transaction, which is subject
to customary closing conditions including regulatory
review, is expected to close by the end of the
third quarter. The acquisition does not include
the U.S. edition of FHM.
The financing of the transaction will improve
PRIMEDIA's debt leverage ratios. The acquisition
is being financed through approximately half
debt and half from the combination of proceeds
from the sale of non-core assets and the issuance
of common equity. The source of the debt will
be the company's existing revolving credit facility.
The equity will be in the form of common stock
as well as an equity bridge. The common stock
offering will be backstopped by funds managed
by KKR, PRIMEDIA's largest shareholder. The
equity bridge will be provided by KKR. The proceeds
from non-core asset sales, expected to be in
excess of $250 million, will be used to repay
the equity bridge as well as debt. Those non-core
assets to be sold will be disclosed at a later
date. As a result, the transaction will improve
PRIMEDIA's capital structure and leverage ratios.
Tom Rogers, Chairman & CEO of PRIMEDIA,
stated: "While the word synergy is often
overused, this could not be a more synergistic
transaction for PRIMEDIA. Beyond providing great
scale in catapulting PRIMEDIA to the number
two spot in the magazine industry in revenues
and single copy sales, it further cements our
position as the number one producer of magazine
editorial and advertising pages each month.
Moreover, the EMAP USA magazine properties strengthen
PRIMEDIA's unique mix of category specific endemic
advertising (with its far more stable characteristics
than general brand advertising), as well as
circulation revenue which is an increasingly
important component of the Company's financial
model."
In addition, the acquisition of the EMAP USA
titles provides the following important benefits:
- Adds significant scale to one of PRIMEDIA's
strongest niche sectors -- the automotive
enthusiast market.
- The new car automotive advertising category
is enormous. The newly acquired Motor Trend
magazine when combined with PRIMEDIA's existing
Automobile title provides a uniquely strengthened
position for the Company in this very significant
market.
- The teen market is another highly significant
focus for PRIMEDIA. The acquisition of Teen
Magazine, when combined with Seventeen, our
Youth Entertainment titles, Channel One, Cover
Concepts, and our Internet teen properties,
including Gurl.Com, provides a strengthened
presence for our network of teen franchises.
- The acquisition further cements PRIMEDIA's
position as the leading provider of niche
topic video in the U.S. Already PRIMEDIA titles
have been translated to 10 weekly cable TV
programs, and with the new properties, 5 more
weekly cable TV programs will be added emanating
from the PRIMEDIA print brands.
- EMAP USA's high tech and action sports titles
add higher growth categories to PRIMEDIA's
enthusiast magazine business. In the action
sports area, PRIMEDIA acquires the Gravity
Games, a leading TV franchise presenting youth
action sports, which is broadcast on NBC.
The Action Sports properties also add substantial
reach in young male demographics.
- This acquisition enables us to further amortize
our About.com Internet infrastructure, which
is now being integrated into the operations
of the entire company. We can now pursue a
wide array of high growth digital opportunities
without increased cost. It has become abundantly
clear that the enthusiast magazine brands
provide a very solid basis for the creation
of multimedia platforms that span print, video
and the Internet, and PRIMEDIA is in a unique
position to exploit these opportunities further
as a result of its new About.com and Consumer
Video units.
- The acquisition provides a unique opportunity
for PRIMEDIA to leverage its overhead that
brings substantial efficiencies as a result
of the new scale of operations. In the areas
of paper purchasing, circulation, production,
technology, finance, and others, there are
substantial cost savings that will be achieved.
- EMAP USA has developed significant sources
of revenue in the area of national branded
sales, which will bolster PRIMEDIA's developing
integrated sales efforts. EMAP USA has also
developed non-advertising revenues beyond
subscription fees, in the areas of licensing,
merchandising, and events.
- Direct marketing initiatives, both offline
and online, will be enhanced by the significant
increase in data base information that results
from the acquisition.
- We will take advantage of our strong management
team under the leadership of John Loughlin,
President and CEO, Consumer Magazine and Media
Group, which has already driven substantial
improvements in the operations of PRIMEDIA's
existing consumer magazines.
Financial Information and Guidance
For the fiscal year ended March 31, 2001, EMAP
USA (excluding FHM) had revenues of $362 million
and EBITDA of $54 million. For calendar year
2001, we expect EMAP USA EBITDA to decline to
approximately $46 million. With cost synergies
and revenue growth, we expect this EBITDA to
increase to $62 million, or 35%, in 2002. Consequently,
the price is 8.3X projected EBITDA.
As we have said, the company expects EMAP USA
to be a strong contributor to EBITDA. At the
same time, the Company continues to see the
effects of a sluggish advertising environment,
especially in the B2B sector and the network
television market in which Channel One competes.
At this time we expect PRIMEDIA's full year
2001 EBITDA from continuing operations will
be in a range of $280 - $300 million which is
consistent with Wall Street consensus estimates.
This will include the effect of this acquisition
assuming a closing by September 30, 2001, but
will be offset by certain divestitures which
should occur during the same period. Further
guidance on 2002 expectations, including the
effects of EMAP USA and asset sales, will be
provided at a later date. PRIMEDIA was advised
by Merrill Lynch on this transaction.
Conference Call
PRIMEDIA will host a conference call today
-- Monday, July 2, 2001 at 10:00 AM, ET, to
discuss Primedia's acquisition of EMAP USA.
In order to participate in the call, please
dial 1(800) 235-0452 if you are in the U.S.,
or 1(785- 832-1077 if you are outside the U.S.
You should dial in at least five minutes prior
to the start of the call. The conference call
ID is Primedia. A recorded version will also
be available after the conference by calling
1(800) 938-0996 in the U.S., or 1(402-220-1540
if you are outside the U.S. No password is required
for replays. The recorded version will be available
two hours after the completion of the call until
7:00pm ET, Monday, July 9, 2001. Access to the
live and replay audio version of the Primedia
conference call will be available on our website
at www.primedia.com (you will not be able to
ask questions via website).
About PRIMEDIA
PRIMEDIA is the new tradition in media. With
2000 sales of $1.7 billion from a unique combination
of traditional and new media properties, it
is the leading targeted content and integrated
marketing solution in both the consumer and
business-to-business sectors. The Company is
the #1 special interest magazine publisher in
the U.S., with more than 230 titles such as
Seventeen, New York, Fly Fisherman, American
Baby, Telephony, American Demographics; the
#1 producer and distributor of specialty video
with 18 satellite and digital video product
lines, including, Channel One Network; and the
#1 news and information group on the Internet,
with over 1,000 special interest web sites led
by About.com. PRIMEDIA's stock symbol is: NYSE:
PRM. More information about the Company can
be found at www.PRIMEDIA.com.
This release contains certain forward-looking
statements concerning PRIMEDIA's operations,
economic performance and financial condition.
These statements are based upon a number of
assumptions and estimates, which are inherently
subject to uncertainties and contingencies,
many of which are beyond the control of the
Company, and reflect future business decisions,
which are subject to change. Some of these assumptions
may not materialize, and unanticipated events
will occur which can affect the Company's results.
# # #
CONTACT:
Media
Whit Clay,
212-446-1864
or
Investor Relations
Warren Bimblick,
212-745-0615
Back to 2001 Archive
|
 |
