NY, 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.
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 companys 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.
terms of the agreement, PRIMEDIA will pay $515 million for EMAP
USA, consisting of $505 million 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.
of the transaction will improve PRIMEDIAs 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 companys 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, PRIMEDIAs 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 PRIMEDIAs capital structure
and leverage ratios.
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 PRIMEDIAs
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 Companys financial model.
the acquisition of the EMAP USA titles provides the following
- Adds significant
scale to one of PRIMEDIAs strongest niche sectors -- the
automotive enthusiast market.
- The new
car automotive advertising category is enormous. The newly acquired
Motor Trend magazine when combined with PRIMEDIAs 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 PRIMEDIAs 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 USAs
high tech and action sports titles add higher growth categories
to PRIMEDIAs 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 PRIMEDIAs developing integrated
sales efforts. EMAP USA has also developed non-advertising revenues
beyond subscription fees, in the areas of licensing, merchandising,
- Direct marketing
initiatives, both offline and online, will be enhanced by the
significant increase in data base information that results from
- 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.
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 PRIMEDIAs 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.
advised by Merrill Lynch on this transaction