Talks have stalled between Meredith and Time Warner over a deal to merge their publishing divisions and create a new publicly traded company.
Top execs from both sides had been huddling in New York until last week, when they suddenly switched the venue to Chicago. No face-to-face talks are taking place this week, according to sources, and word is that the talks have cooled.
Time Warner was in discussions to spin off most of its Time Inc. titles, including People, InStyle and Real Simple, into a new entity controlled by Meredith, the publisher of Better Homes & Gardens and Ladies’ Home Journal.
Both Meredith CEO Steve Lacy and Time Warner boss Jeff Bewkes ducked questions on Monday at a Deutsche Bank conference in Palm Springs, Fla. Analysts asked how the talks were going — not whether they had cratered.
“We’re not commenting on marketplace rumors,” said Lacy.
Bewkes responded more cryptically. “You know, we can’t comment on those things,” he said.
“The press is very active. I think there ought to be one Chauncey Gardiner comment at every one of these things, right?” he said, referring to the Chance the Gardener character from the book and film “Being There,” whose name is mistakenly heard as Chauncey Gardiner. “The press is very active; who knows if they know what they’re talking about?”
The question now is whether the talks can be revived or whether they’ve hit a brick wall. Observers seem to think this is bigger than a speed bump.
“Considering how long it has been going on, they should have been able to work something out by now,” said Barry Lucas, an analyst at Gabelli & Co. “There are a lot of things that work against a deal and the bigger the deal, the harder it is to get done.”
Sources said the talks started in September but weren’t leaked until late last month by Time Inc.’s own Fortune magazine.
The price tag was expected to be somewhere in the vicinity of $1.7 billion to $2 billion, although it would have taken the form of a cash-free stock swap with the larger Time Warner contributing the majority of the stock. The expectation was that Time Warner would take cash out down the road in the form of a dividend to avoid a tax hit.
A bigger issue than money could be the intense culture shock from merging New York-based Time Inc. with Meredith, whose headquarters are in Des Moines, Iowa.
Although People has had troubles on the newsstand in recent years, it remains far and away the most profitable magazine in America with its mix of celebrity news and human-interest stories. Meanwhile, InStyle is a leader in the fashion category.
Neither of those topics has gained much traction at Meredith, which has stuck to monthly women’s service magazines.
With Bewkes apparently committed to dumping the declining Time Inc. titles, the debate now is what will happen to the group next and whether a new suitor will appear.
“Morale is terrible,” said one insider. “There’s a lot of anger at Bewkes over the way he mishandled Time Inc.,” said one source.
No sugar
It looks like Time Inc. CEO Laura Lang lost out on a big digital deal right around the time Meredith entered the picture.
Lang last fall had actively pursued the acquisition of PopSugar and its San Francisco-based parent, Sugar Publishing, from founders Brian and Lisa Sugar.
Started in 2006, the celebrity blogging site has received more than $46 million in venture funding from Sequoia Capital and Institutional Venture Partners and is said to be profitable.
As she worked on the deal, Lang must have been mindful of the criticism inside Time Inc. that she had little to show after a year in office.
Buying Sugar Publishing — whose blog network garners 11.8 million unique visitors a month and boasts an e-commerce component — could have been a signature acquisition for Lang.
But sources said she was undermined by Chief Financial Officer Howard Averill and Chief Legal Officer Maurice Edelson — the two survivors of the infamous triumvirate that ran the company for nearly a year before Lang was installed by Bewkes — who were wary of the price tag.
“It would have been a great fit for People and Time Inc.,” said one industry source, “but the price was probably too high.”
Time Inc. declined to comment. Several calls to Pop Sugar were not returned. Sources say the talks ended in December.
Kavulla in
Some business is still getting done at Time Inc.
Sources say Brandon Kavulla, most recently the creative director of Wired, will be joining Fortune as its new creative director. He succeeds Emily Kehe.
At Condé Nast, he was forced out when Scott Dadich took over as chief editor of Wired. During his career, he has pulled three ASME nominations for design at Wired, Spin and Details.