Time Life Inc., perhaps best known for its “As Seen on TV” music and video collections, found a new home in December, as Ripplewood Holdings and ZelnickMedia agreed to acquire the company from Time Inc., completing the deal on New Year’s Eve. Terms of the transaction were not disclosed.
Time Life has been around since the early sixties, when it was created by Time Inc. to serve as its book division. The business has since grown into more of a direct marketer of music and video collections, although the company still publishes books as well as other multi-media products. From “Guitar Rock: The Hard and the Heavy” to “The Best of Beavis and Butthead,” the company’s products are generally found and sold directly on commercials and late-night infomercials.
Ripplewood and ZelnickMedia made the Time Life purchase through their Direct Holdings Worldwide platform, and the add-on will sit beside home products marketer Lillian Vernon Corp., which was acquired through the same platform last summer. While Lillian Vernon was purchased for $60.5 million, Ripplewood would not disclose the value of the Time Life deal. Published reports have indicated the transaction will be made up of a cash payment in addition to a royalty paid annually to Time Warner that will be based on future performance. As part of the transaction, Ripplewood and ZelnickMedia acquired an exclusive license for the worldwide use of the “Time Life” brand.
In a press release the firm said the acquisition would give the combined company revenue in excess of $500 million, and in 2003, revenue at Time Life has been estimated to be around $350 million, although Ripplewood would not confirm that number. Both companies have had trouble staying in the black, with each posting significant losses in recent years. In the first nine months of 2003, Time Life posted negative earnings of more than $50 million, according to reports, while Lillian Vernon lost $9.2 million in 2002.
In teaming with ZelnickMedia, Ripplewood has gained the experience of Strauss Zelnick, the former chief executive of BMG Entertainment, who Ripplewood hopes will be able to return each business to their former glory. Zelnick will work directly with each company and serve as chairman and chief executive. “We’ve been in business with ZelnickMedia for about three years now,” Ripplewood Vice President Saguna Umerjee said. “We’ve looked at some big things with him in the past, but at the end of the day it comes down to pricing and valuation,” two qualities Umerjee said the team was able find in the Lillian Vernon and Time Life purchases.
But even as the two deals share that common trait, some skeptics have been unable to find many more parallels between the two businesses. However, Umerjee noted that while Lillian Vernon and Time Life do not market the same type of products, the two businesses have a common focus as far as their operations are concerned. “When we started this platform we were looking for businesses in the direct marketing space,” she said. “We’re primarily concentrating on establishing a stable of strong brands. And even as the products are very different, the operations are very compatible and the top line focus will be on building the different categories of products.”
Regarding Time Life, the buying group will primarily put its efforts toward product development and integrating the business operations into its direct marketing platform to take advantage of available synergies. “We’ll continue to focus on music compilations and video, but we’d like to see Time Life return to the book business and expand in other facets of multi-media,” Umerjee said. “We still have a lot of work to do as far as integration, but the aim is to create value by spreading the cost of the distribution.”
Umerjee does not expect the Time Life acquisition to be the last for the platform, although she would not comment on any potential deals that could be on the horizon. And while an exit is still not in the platform’s immediate future, Umerjee believes a sale to a larger direct marketing or media business as a possibility.
Ripplewood used equity from its $1 billion Ripplewood Partners II LP fund to finance the acquisition. In addition to the Time Life purchase, Ripplewood has been quite active in the past month. It was also reported that the firm is eyeing an IPO for its Shinsei Bank portfolio company, which could net upwards of $2 billion. The offering would price on the Tokyo Stock Exchange and is currently scheduled to occur later this month.
Buyer: Ripplewood Holdings and
Target: Time Life Inc.
Seller: Time Warner
Lawyer: Simpson Thacher
Accountant: RH: KPMG; Time: Kravatz