It looks like the equivalent of a new transmission for sputtering auto magazine publisher Source Interlink.
Source Interlink — the owner of a stable of car magazines, including Motor Trend, Automobile and Hot Rod — shook up its executive ranks and split itself in two on Monday, fueling rumors that one or both of the units could end up on the selling block.
Source Interlink, which also owns the No. 2 magazine distribution business in the US, last month slashed its operations by about 100 people and shut down Modifier magazine.
In the latest shake-up, Michael Sullivan, the current overall CEO, was moved to chief executive of Source Distribution only, which is responsible for the bulk of the company’s revenues even though the media side remains more profitable.
Scott Dickey, who until December was running Competitor Media, a small publisher of specialty sports titles that was sold, was tapped to head up the media side of the company as the CEO of Source Interlink Media.
He previously worked on some of the company magazines when they were part of the Time Inc.-owned Transworld Media, that was ultimately sold by Bonnier and then moved to Source.
Dickey said the he wants to push for the expansion of the Source brands into new markets. “it is going to be very tough to get year over year growth from traditional print publishing,” he acknowledged.
The publishing and distribution arms will each have a separate board of directors.
Source Interlink, after a debt restructuring last October, is now majority-controlled by Golden Tree Asset Management, with smaller stakes held by JPMorgan, GE Capital and Credit Suisse.
The distribution arm that gets magazines and other items to retailers and controls nearly a third of the US market has been under intense pressure since 2012 when it lost the distribution rights to its No. 2 client, Kroger’s supermarket chain, to Jimmy Pattison’s News Group.
Sullivan was able to recoup some of the lost Kroger’s revenue by raiding Jimmy Cohen’s Hudson News and sprinting off with distribution deals with drug store chains Rite Aid and CVS.
The company’s financial woes in media can be traced back to 2007, when then-publicly traded company controlled by Ron Burkle’s Yucaipa Cos, in an attempt to broadened its traditional base, overpaid for Henry Kravis’s Primedia by spending $1.2 billion for the the enthusiast magazine.
Within two years, the equity players, including Burkle’s Yucaipa, were wiped out in a pre-packaged chapter 11 bankruptcy that also shaved about $1 billion from its $1.9 billion mountain of debt.
The troubles that racked Detroit automakers during the recession, plus the general upheaval in the magazines distribution field, dealt the company a double whammy. Revenues for the now private company have fallen about 50 percent from its height of close to $2.4 billion in 2008 to an estimated $1.2 billion last year. Profits were estimated at around $80 million last year.