Deals

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

Time to call it a day?

Magazine publisher Time Inc. -- one of the last remaining carvings of the former Time Warner media conglomerate -- rebuffed a takeover bid from some opportunistic investors in October, my colleagues at Bloomberg News have learned. Despite there being no deal (yet?), shareholders seem to think the company is officially in play. Time surged 16 percent Monday, the biggest gain ever had by this stock, which was spun off from Time Warner Inc. in June 2014.

Opportunistic Offer
The stock was trading near a low when investors Edgar Bronfman Jr. and Ynon Kreiz made their bid
Source: Bloomberg

If the $1.6 billion company were to sell itself, virtually no traces of its former parent would be left in the public markets. Not to mention, it would put a nail in the coffin of what's widely regarded as the worst mega-merger in history: AOL Time Warner.

AOL Inc., which had transformed itself into a sturdy mobile-advertising technology company, sold itself to Verizon Communications Inc. last year. About the same time, Charter Communications Inc. relaunched its offer for Time Warner Cable Inc. in a deal that closed this past May. Wireless giant AT&T Inc., seeking to capitalize on the growth opportunity in mobile video, is trying to acquire Time Warner Inc., the content business that owns TV networks HBO, CNN and TBS. Time Inc., owner of People, Sports Illustrated and Fortune magazines, is what remains.

One Deal to the Next
Will the Time magazine portfolio be the next to go?
Source: Bloomberg
*It's unclear whether a Donald Trump administration will allow for AT&T's acquisition of Time Warner.

Time's spurned suitors are Edgar Bronfman Jr., who helps run private equity firm Accretive LLC and was chairman of Warner Music Group, another former piece of Time Warner, and Ynon Kreiz, who serves on the Warner Music board and used to be CEO of Maker Studios. Their all-cash offer, said to be in the range of $18 to $20 a share, had the backing of Len Blavatnik's Access Industries, which controls Warner Music. 

While their bid was as much as 50 percent higher than Time's average closing price for the past 20 trading sessions, it doesn't look like much of a premium considering where the stock had been trading just a few months ago. (Excluding today's gains, Time had fallen about 17 percent during the past year.)

Even so, Time shareholders are signaling to the board that they are intrigued by the offer and want it to negotiate a deal because, well, this:

The Future of Print
A decade ago, magazine publisher Time Inc. was generating more than $5 billion in annual sales. Analysts see that figure slipping below $3 billion by 2018
Source: Bloomberg

The offer price also looks good considering where analysts' estimates are. The highest is $20, from Macquarie's Tim Nollen, while Kyle Evans of Stephens Inc. lowered his target this month to $15 from $18. 

It's possible that other bidders could emerge and support the shares. For a financial suitor, the appeal is Time's free-cash-flow generation, and it would probably look to shut down some more of its less influential titles (Time still owns a lot of publications). And don't forget, a couple years ago Time almost merged with Meredith Corp., the $2.4 billion publisher of Better Homes and Gardens and Martha Stewart Living. 

Meantime, new Time CEO Rich Battista and his team are trying to make the business less reliant on declining print advertising and subscription revenue. Time's properties have become more active on social media. The company also launched Motto, a site for millennial women, and it acquired Viant Technology to better target its digital ads. 

All that said, this is shaping up to be a "take the money and run" situation. Even if Time's strategy could pay off in the long run, for now it's hard to get excited about what's still largely a stack of magazines.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net