Deals

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.

And there it is. Time Inc. has resisted a takeover so long that we've now entered the Faustian stage, where a billionaire -- or rather pair of them -- swoops in carrying all the money a struggling publisher could dream of. 

It's reported that brothers Charles and David Koch -- the deep-pocketed benefactors of a highly influential network pushing conservative causes behind the scenes of the U.S. political system -- have tentatively agreed to help Meredith Corp. acquire Time, the publisher of the namesake news magazine, among other titles. Word is the Koch brothers would provide an equity injection of more than $500 million. Time's market value is $1.6 billion, compared with Meredith's $2.6 billion. 

Meredith is reviving merger talks yet again as Time's stock fell last week to its lowest level since it was spun off from Time Warner Inc. in mid-2014. While the strategic benefits of combining the businesses in the shrinking print-magazine industry have long been obvious, price has remained the sticking point. And yet, Time has only gotten cheaper as the board dug in their heels

It's High Time
Magazine publisher Time Inc. has resisted a takeover for years, but at these levels the stock is just asking to get bought and its peer Meredith Corp. seems happy to oblige
Source: Bloomberg

The price last rumored in March during the formal bidding process for Time was above $20 a share, but the board decided not to sell itself. Even after Time's 23 percent stock gain Thursday on the Koch reports, $20 would amount to an enticing 28 percent premium from here. And as analysts' notes began to trickle out, Wells Fargo & Co.'s Eric Katz wrote that Time could still score the $18 to $20 a share. That's the price range that was reportedly under consideration last fall by the investor group led by Edgar Bronfman Jr., one-time chairman of Warner Music Group, which is also a former piece of Time Warner. All this time and we're back to where we started.

Time CEO Rich Battista has been trying to morph the company's image from one of a withering glossy-magazine business into a modern-day media company that can compete in the digital advertising world, which is currently dominated by the likes of Facebook Inc. While Time's digital-ad revenue climbed 2 percent to $132 million in the third quarter, that didn't come close to offsetting an almost 18 percent drop in print-ad sales. 

Print Pain
Time Inc.'s gains in digital ads are less exciting in the context of its broader revenue trends:
Source: Bloomberg

Battista told Bloomberg News in July that he's considering selling Coastal Living, Sunset and Golf magazines in an effort to focus on the company's most viable brands. Its larger ones include People, Sports Illustrated and Fortune. In June, an internal memo from Battista announced 300 positions would be eliminated through a combination of layoffs and buyouts. 

Meredith, publisher of Better Homes & Gardens and Shape, isn't entirely dependent on the magazine business. The company generated 37 percent of its $1.7 billion in revenue last year from more than a dozen television stations with related digital properties, and a record $63 million of that came from political ads amid the U.S. presidential race. 

With Time's stock down and the Koch brothers involved, Meredith may be able to put together a more palatable bid. The question is, how much influence do the Kochs -- who are 82 and 77 years old -- want over the combined entity? Peter Kafka of Recode writes that it's possible their interest is "purely economic" because they buy into Time's digital pitch. Sure, it's possible. 

Take The Money
Judging by analysts' 12-month share-price forecasts, it looks like Time investors would be better off selling now to Meredith than waiting around another year:
Source: Bloomberg

Other wealthy figures who have bought up media assets over the years include Amazon.com Inc. founder Jeff Bezos, who purchased the Washington Post for a steep $250 million in 2013. The sale of Dow Jones to Rupert Murdoch's News Corp. for $5.2 billion a decade ago also fits into this category. And Warren Buffett has an affection for local newspapers, even as they've succumbed to readership and ad declines that have forced layoffs. There's also been the rocky transition of the Las Vegas Review-Journal's ownership to Sheldon Adelson, as some reporters claimed he stymied the paper's editorial freedom. As the Post has learned amid Trump's criticism on Twitter, once you sell to a big media figure, you can't escape the dotted line that will be drawn between editorial decisions and the owner.

Will Meredith finally get its Time? Money certainly talks when your stock is losing value by the day and the future is so uncertain.

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:
Beth Williams at bewilliams@bloomberg.net