In a conference call with Meredith executives, the company said it expects the sale to close in early June. Furthermore, Meredith expects the addition of the G+J titles to generate pre-tax earnings in the low-to-mid $30 million range. The sale will give Meredith publications a reach of more than 135 million adult American women.
"Parents, Child, Fitness, and Family Circle are established and well-known consumer magazines that will benefit greatly from Meredith's proven editorial, circulation, sales, database, and brand-building expertise," said Bill Kerr, Meredith's chairman and chief executive officer, speaking on a conference call Tuesday morning. "These titles have significant upside, but have underperformed in recent years. We possess the unique skills and resources needed--particularly in the circulation area--to help these magazines realize their potential."
Bertelsmann's Gruner + Jahr USA unit is still looking to sell business magazines Inc. and Fast Company. If it doesn't find a buyer, it has an option to sell them to Meredith, which said it would then sell them to another company.
In terms of the titles discussed today, Kerr said it will broaden Meredith's portfolio of women's magazines.
"One of our growth strategies is to broaden our magazine portfolio to reach younger women, and to serve the rapidly growing Hispanic market," Kerr said. As an example, Stephen Lacy, Meredith's president and COO, noted that Parents magazine's Spanish-language title, Ser Padres, already has a distribution of 500,000, while Fitness and Child appeal to women under the age of 35.
"Our acquisition of the American Baby Group in late 2002 helped us establish a foothold in this market," said Lacy. "Now, with the addition of Parents, Child,and Fitness, we will have added approximately 30 million female readers with a median age below 35 in just over two years. This establishes Meredith as the premier magazine company serving expecting and new families, who are leading purchasers of consumer products and services. Additionally, the acquisition adds to our growing presence in the Hispanic marketplace," Lacy continued. "Combined with American Baby's Hispanic titles, our custom marketing programs and the September 2005 launch of our new Spanish-language women's title--Siempre Mujer!--Meredith is uniquely positioned to serve Hispanic consumers, the fastest-growing segment of the American population."
Media buyers applauded the move--as Kerr noted that Meredith's advertising pages will increase by 60 percent to nearly 13,000, as measured by the Publishers Information Bureau.
"There have been so many rumors surrounding the sale of G+J for a long time," said Steve Greenberger, senior vice president, director of print media at Zenith Media. "It's been said that some of the people they brought over to run it here were brought in as painters to fix up the house for selling. The titles that Meredith is absorbing will work most synergistically with their women's lifestyle magazines. Despite the hassles G+J have had, the individual magazines have performed nicely. They have a smart team of publishers who have come up with some appealing marketing packages for advertisers. The acquisition makes the prospect to build on those marketing packages even greater."
Robin Steinberg, senior vice president, director of print investment, MediaVest USA, added: "It's a great move on Meredith's part. It expands the breadth and depth of their portfolio with these very strong, recognizable titles, and should present new strategic advertising opportunities and new ad packages."
Buyers were not surprised by the move, although G+J representatives had earlier this year dismissed talks of a sale.
"Overall, this was not a surprise, given the circulation problems and financial reporting issues that have plagued Gruner + Jahr for the last few years," said Denise Mosco, senior partner, associate director of print communications, Mediaedge:cia. "Plus, when Russell [Denson] was brought in as head of G+J USA last year, the sense was that he was either going to sell them all at once or one by one. The magazines themselves are very good, and Meredith has a proven track record. I think this is the best thing that could happen for the magazines--and gives them a second life."
Still, Mosco and others didn't think this would lead to a wave of consolidations throughout the magazine industry.
"Time Inc. and Hearst have new magazines in the construction phase, and Meredith really hasn't been thinking along those lines," Greenberger noted. "They've been in the buying mindset, and this seems like a good way for them to catch up. Ultimately, this could lead the other titles to seek out other magazines to buy, but I don't think so. This was an isolated situation."