Time Warner’s talks to spin off most of the Time Inc. titles into a new publicly traded company controlled by Meredith Corp. were quietly started last fall, sources said.
Now that they are out in the open, insiders expect the pace of negotiations to pick up with a final deal hammered out within 30 days.
With Time, Sports Illustrated and Fortune excluded from the deal, sources say the price could drop into the $1.7 billion range — below the $2.5 billion to $3 billon or so that the entire company might have fetched.
The three titles that will stay with Time Warner are believed to have cash flow of around $80 million. The entire company posted a profit of $420 million last year on revenue of $3.4 billon, but minus those three titles, profit would have been closer to $340 million.
With an earnings multiple of five — which is the most even the best print properties can expect these days — it puts the price tag at $1.7 billion. Before the 2008 recession, quality publishing operations could command multiples of 10 times earnings.
Meredith execs are expected to stay in town through today to try and hammer out terms of the deal, which is expected to yield a new publicly traded company that includes People, InStyle, Real Simple and other women-targeted titles.
Meredith, based in Des Moines, Iowa, owns TV stations and magazines such as Better Homes and Gardens, Ladies’ Home Journal, Family Circle and Fitness.
Meredith posted cash flow from operations last year of $195 million — less than half that of Time Inc.
But Meredith, headed by CEO Steve Lacy, will have control over the new entity — and that has many Time insiders nervous.
“I’d guess that most of the centralized jobs in Time Inc. will disappear,” said one source.
Time Inc. CEO Laura Lang, who has been on the job a year, and Time Inc. Editor-in-Chief Martha Nelson, who has been there just a few months, should be feeling jittery.
There has been no sign of another suitor.
On the strategic front, rivals Hearst and Condé Nast are not interested.
Hearst Magazines, which dipped during the recession, is rapidly improving after digesting Hachette Filipacchi Media two years ago.
But another big deal as large as Time Inc. could raise anti-trust concerns.
Condé Nast parent Advance Publications still has most of a $500 million war chest from its sale of Discovery stock two years ago. However, it has a lot of headaches in its newspaper wing and has been using its cash judiciously to make small bets on digital properties.
On top of that, Time Warner CEO Jeff Bewkes wants a deal done as quickly as possible.
“Jeff wants a clean exit,” said one source. “He’s not trying to get the extra $200 million he might get if he conducted an auction.”
Penguin deal OK’d
The Justice Department gave its blessing to the proposed merger of Pearson’s book publishing unit, Penguin, with the Bertelsmann-controlled Random House.
The deal, which was announced in late October, puts best-selling Random House author John Grisham under the same corporate umbrella as Tom Clancy.
Bertelsmann will own 53 percent and Pearson 47 percent of the new company, Penguin Random House, which will be the world’s No. 1 English-language publisher.
The deal still needs clearance from the Canadian Competition Bureau and the European Commission, among others, but both companies said they expect the deal to close in the second half of the year.
Adweek goings-on
It was not all pink slips at the restructuring of Guggenheim Digital Media — formerly Prometheus Global Media — earlier this week.
At Adweek, James Cooper has been running the show since Michael Wolff was given the heave-ho in October 2011, but he still had the title of executive editor. This week, new CEO Ross Levinsohn promoted Cooper to editorial director of Adweek and gave him control of digital content and production.
Levinsohn is decentralizing the digital operations and pushing it down to individual editors Bill Werde, editorial director at Billboard, and Janice Min, editorial director at the Hollywood Reporter.
Exit at Vogue
Laurie Jones, managing editor of Vogue and Anna Wintour’s right-hand woman, is stepping down Feb. 28. One of her claims to fame was hiring a young Wintour as a senior editor of New York, where Jones was the managing editor.
A few years later, after Wintour had edited British Vogue, HG and American Vogue, she returned the favor and hired Jones at Vogue.