Koch Brothers’ Pledge Not to Meddle in Time Inc. Is Met With SkepticismBy
Billionaires’ stake in Meredith deal puts employees on edge
Time Inc. CEO said to assure staff of independence at meeting
But inside Time Inc.’s New York headquarters Monday, news that the Kochs were helping fund a takeover of the once-mighty magazine publisher -- home not only to Time magazine but also Fortune and Sports Illustrated -- was greeted with a mixture of alarm and resignation.
In a town-hall meeting, employees sought assurances from Chief Executive Officer Rich Battista Monday that the Kochs wouldn’t use the publications to advance their political causes, according to people who attended. Battista addressed a question about the Kochs’ involvement by reiterating a pledge by acquirer Meredith Corp. that the brothers would have no influence in the management or editorial at its magazines and wouldn’t have a seat on its board, the people said.
Other employees are optimistic that the Kochs will stay hands-off and Meredith will provide the funding for Time to reinvest in journalism after years of cutbacks, according to one person, who asked not to be identified discussing internal matters. Time Inc. is one of many print publishers relying on the largess of billionaires as Facebook Inc. and Google lure advertisers away.
“Time will be the bellwether because it’s a straight-news publication,” said Rick Edmonds, an analyst at Poynter Institute, an organization that promotes independent journalism.
Plenty of media moguls, from Rupert Murdoch to Sheldon Adelson, have made promises to preserve the editorial independence of publications they acquire and been accused of breaking them by journalists in their own organizations. Meredith, which is getting a $650 million investment from the Kochs’ private equity arm to fund its $1.8 billion acquisition of Time Inc., will be under intense scrutiny from the billionaires’ critics for signs of editorial meddling.
Time magazine, first published in 1923 under the leadership of Henry Luce, was once one of the most influential publications in the U.S. While it’s lost some of that luster, it’s still an important chronicler of American politics and news -- witness President Donald Trump’s tweets about whether he would be the magazine’s person of the year.
Meredith’s magazines include more apolitical titles such as Better Homes & Gardens. The Des Moines, Iowa-based company specifically selected the Kochs over other financing partners in part because the billionaires didn’t seek a board seat and have a track record as hands-off investors, Art Slusark, a spokesman for the company, said in an email. No one from Meredith has ever met or communicated with the Koch brothers, Slusark said.
The Kochs won’t be completely out of the loop, however. Each quarter, Meredith’s senior management will meet with Koch Equity Development to discuss “current business, financial and strategic matters,” according to a filing. While the Kochs won’t have a board seat, they’ll have the right to designate an observer at Meredith board meetings. That provision could be invoked if Meredith decided not to pay an annual dividend of about $55 million to the Kochs over the next three years, though the company intends to honor the payout, Slusark said.
The Kochs declined to comment. The brothers started Koch Equity Development in 2002 to find and finance acquisitions that fit companies owned by Koch Industries. In recent years, KED has expanded to finance acquisitions led by others, such as Meredith’s deal for Time. In the political sphere, the brothers back organizations including Americans for Prosperity to promote their free-market views through advertising and advocacy.
Time Inc. staffers have other concerns beyond editorial independence. When Meredith tried to buy Time Inc. in 2013, it didn’t want Time magazine or Sports Illustrated, raising questions about Meredith’s intentions for those titles now. Meredith’s bid also raises the prospect of future layoffs. In a conference call Monday, Meredith executives laid out a plan to find more than $400 million in cost savings, citing “incremental opportunities by bringing the companies together.”
Those potential savings from overlapping costs could be a compelling reason alone for the Kochs to invest in Meredith, regardless of whether they’re looking for media influence. Shares of both companies jumped Monday after the deal was announced.
The Financial Times reported Monday that Meredith is exploring the sale of Time and Sports Illustrated and is planning significant job cuts. The company isn’t making decisions about its magazine portfolio until after it conducts a review, Slusark said.
Time Inc. also publishes Essence, Entertainment Weekly and People, its largest print magazine, which generates about one fifth of its annual revenue.
The Kochs’ financial backing of Meredith’s bid is reminiscent of Mexican billionaire Carlos Slim’s $250 million loan to the New York Times in 2009 to help the paper get through the financial crisis. In 2015, Slim exercised his stock options to become the Times’ largest investor. Slim doesn’t appear to have meddled in the Times’ coverage of his Mexican telecom empire, Edmonds said.
Like Slim with the Times, the Kochs will have common stock at Meredith, not the super-voting shares that preserve the founding family’s control of the company.
Bloomberg competes with the Times and other outlets in providing news and information to the financial community.
The Kochs have shown some interest in funding media outlets before. David Koch sponsored Ken Burns’ recent Vietnam War documentary. Koch Industries has also sponsored “Marketplace,” a business program on NPR. This summer, the Charles Koch Foundation provided funding to the Poynter Institute for a program to train student journalists.
“We accepted a grant from them with all the proper understanding of what it was and what it wasn’t,” Edmonds said. Poynter made sure “that it didn’t have an ideological tinge.”