Lagardere Gets $886 Million Offer From Hearst for International Magazines

Lagardere SCA, France’s biggest publisher, said it received a binding 651-million euro ($886 million) offer from Hearst Corp. for its international magazine business.

The deal would cover 102 titles in 15 countries, Lagardere said in a statement. Paris-based Lagardere would continue to own the Elle trademark while receiving royalties from Hearst for the magazine’s print, Internet, digital and mobile rights.

After a drop in advertising during the economic downturn in 2009, “we concluded that outside of France we lacked the critical scale to be able to resist such a recession,” Chief Executive Officer Arnaud Lagardere said on a conference call today. “The French advertising market is less volatile.”

Lagardere expects the deal with Hearst to be completed by the end of the third quarter. The company, whose titles include “Car and Driver,” and Hearst, the New York-based publisher of “Esquire” and “Cosmopolitan,” began exclusive talks in December and the negotiation period will now be extended, according to the statement.

Lagardere, which also publishes “Paris Match” and Stephenie Meyer’s “Twilight” novels, wants to focus on its main book and domestic-press businesses, while also pushing into sports marketing. It has begun preparations for an initial public offering of its 20 percent stake in pay-TV operator Canal Plus France. He also wants to sell a 7.5 percent stake in European Aeronautic Defence & Space Co., the Airbus SAS parent.

Lagardere fell as much as 4.3 percent in Paris trading. The shares were 2.5 percent lower at 32.65 euros as of 10:33 a.m.

Property Assets

The units being sold had revenue of 774 million euros last year and operating profit, after minorities, of 37.7 million euros, Lagardere said. Royalties from Elle will contribute about 8 million euros a year to operating profit, it said.

The countries covered by the Hearst offer are the U.S., Russia, Ukraine, Italy, Spain, the U.K., China, Japan, the Netherlands, the Czech Republic, Hong Kong, Mexico, Taiwan, Canada and Germany. Lagardere said it will retain some real estate assets in those countries worth about 30 million euros.

Lagardere last year created a new unit, Lagardere Unlimited, to handle sports rights and athlete representation, and bought U.S. sports agency Best.

CEO Lagardere said on the call that the company will use the proceeds from the sale to pay down some debt. It may then look for acquisitions in the sports, retail and digital fields, and may also return some money to shareholders through buybacks or special dividends, he said.

“The immediate priority will be to pay back some debt,” he said. “But cash is cash.”

The CEO is changing the company’s focus after successfully fighting off a challenge over strategy from activist investor Guy Wyser-Pratte, who attempted to win a board seat in April and criticized the company’s plans in the sports business.

Lagardere has said he wants the company to compete directly with rivals such as IMG Worldwide Inc., the New York-based sports group controlled by Forstmann Little & Co.

To contact the reporters on this story: Matthew Campbell in Paris at mcampbell39@bloomberg.net; Gregory Viscusi in Paris at gviscusi@bloomberg.net.

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net.

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