InterMedia Loads Up On Hunting, Firearm Titles

Media-focused buyout firm InterMedia Partners LP is hunting for returns in the outdoor enthusiast market. In its latest deal, the New York firm agreed to acquire 17 hunting, fishing and shooting titles from Primedia Inc., a publicly traded portfolio company of Kohlberg Kravis Roberts & Co., for $170 million.

The deal will likely include a “market level of debt-to-EBITDA” financing of about 6.5x, while about 30% to 40% of the transaction value will be covered by equity, InterMedia Partners Managing Partner Peter Kern tells Buyouts. Once the transaction closes, expected in the first quarter of 2007, InterMedia Partners intends to bundle the titles into a single platform called InterMedia Outdoors.

The top three publications in the media suite are Game & Fish, Guns & Ammo and Petersen’s Hunting, respectively. In aggregate, the 17 titles—including their companion Web sites, TV and radio programming, and events—are on track to post revenues of about $100 million for the year, with EBITDA margins running between 15% and 16%, according to a research note published by Bear Stearns Analyst Michael Meltz.

The agreed-to carveout follows InterMedia Partners’s investment this May in The Sportsman Channel, a cable television network dedicated solely to hunting- and fishing-related programming. “There are 50 million people engaged in these activities in the U.S., and they spend about $70 billion doing it,” Kern says. “But as a media category, we believe it is an underserved segment with lots of room for growth.”

Collectively, the publications that would make up InterMedia Outdoors have a circulation of about 3 million and total readership of about 21 million, Kern says, adding that the outdoor enthusiast market is one characterized by passion and loyalty.

“Our attraction [to this investment] isn’t so much based on guys like you and me looking at Guns & Ammo in a New York Barnes & Noble—it’s more for the actual practitioners of these sports who do it on a regular basis and want to get better at it,” Kern says.

The outdoor enthusiast market is not one characterized by high growth, says Kern, noting that the number of hunters in the U.S. has remained relatively flat, while growth in the sport shooting market has been slow.

“But this investment is not dependent on the growth of these sports,” Kern says. “As it stands, there is a lot of un-captured value in the existing enthusiast base, and we see tons of running room before the issue comes up of whether the aggregate is growing at a good clip.”

Indeed, much of that uncaptured value rests in technology, and InterMedia Outdoors plans to tap it by building out the Web products of each publication, some of which grant viewers free access to informative how-to videos on topics like “The Perfect Handgun Grip” or radio interviews with the likes of professional angler Pat Neu.

“The internet, TV and radio, which have historically been more ancillary to the titles, will become more prominent going forward,” Kern says. Add-on acquisitions could also be a strategy, he noted.

Equity for this deal will come from InterMedia Partners VII LP, which is targeted to raise $1 billion.—A.N.