Evercore Partners portfolio company American Media Inc. (AMI) flexed its financial muscle last month, reaching an agreement to acquire Weider Publications and its related properties for $350 million. The deal stretched AMI’s reach into the health and fitness arena, and will be accretive to the company’s earnings as soon as the transaction closes, which is expected to occur in the first quarter of 2003.
Weider Publications first went on the auction block in September. Rothschild managed the bidding process and fielded offers from AMI, Veronis Suhler Stevenson, Nautic Partners and Aurelian Communications, which is backed by Providence Equity Partners. J.P. Morgan Securities and Bear Stearns & Co. acted as financial advisors to AMI and Evercore and will also provide the financing for the deal.
Weider Publications publishes Muscle & Fitness, Flex, Men’s Fitness, Shape, and Natural Health, among other magazines, and has a readership in excess of 23 million. The company has seen its advertising revenues more than double since 1997, while circulation has grown at a 16% compound annual growth rate. Evercore Partners President Austin Beutner added that Weider’s overall earnings and revenues have been growing at a rate north of 10% for the past five years, and he expects the company to continue to show growth going forward.
AMI paid 12.7 times cash flow for the Weider titles, which at $350 million exceeds the initial estimates as to what the company was originally expected to fetch. Early reports published at the time of Weider’s announcement had estimated that the publications business would carry a $250 million price tag. There has been some grumbling that AMI may turnaround and sell Shape, which some in the industry believe could command a higher multiple than AMI paid for Weider Publishing as a whole. However, Beutner dismissed that idea as “idle speculation.”
Beutner indicated that Evercore had been in discussions with Weider Publications for a number of years and when the company decided to put itself up for auction, Evercore jumped at the opportunity to join the bidding. He noted that Weider’s publications are “very well positioned,” with each property at least the first or second leading title in their respective markets. Beutner added that the titles are recession-resistant, reiterating that the publications still saw their advertising revenues increase even as the industry in general was struggling the past few years.
Beutner further expects that Weider will benefit from being under AMI’s umbrella, by utilizing the company’s relationships, assets and knowledge. Evercore originally acquired American Media in 1999 for around $835 million and installed industry veteran David Pecker as head of the company. AMI is strong in the weekly magazine market, and its portfolio of titles include the National Enquirer, Star, Country Weekly and Auto World, among others. Later that same year, AMI boosted its offering with the $105 million acquisition of Globe Communications. The company also owns Distribution Services, which is the leading in-store supermarket merchandising company in the country.
Beutner expects the publishing world to continue to consolidate and he noted that AMI is well positioned to take advantage of that trend. He added that as part of a larger company, Weider Publishing would be able to lower its costs through buying paper more efficiently and reducing the costs of printing. Additionally, he believes the categories that Weider serves, specifically the health and fitness markets, will further grow as the baby boomers and Generation X increasingly adhere to healthy living standards.
Evercore used its Evercore Capital Partners, LP fund for the acquisition, which debuted in 1995 with $510 million. That fund is now substantially invested, according to a source, who added that the firm is now virtually finished raising money for its successor fund, Evercore Capital Partners II, LP. The firm held its second closing for the fund in November at $400 million and reportedly Evercore has received commitments from AMR Investment Services and the University of Texas Investment Management Company, both of whom also invested in the first fund. Atlantic-Pacific served as the placement agent for ECP II. The source indicated that the fund is expected to announce its final close early next year.