Meredith Scoops Time in $2.8 Bn All-Cash Deal Helped by Koch Brothers’ Investment

7:15 AM, Nov 27, 2017 — Shares in magazine publisher Time (TIME) were sharply higher on Monday morning after media and marketing company Meredith (MDP) said it had agreed to acquire the publisher of titles such as Horse & Hound, Country Life and Sports Illustrated for $2.8 billion in an all-cash transaction.

The deal, which sees Meredith paying $18.50 in cash per share of Time, aims to create a more diversified entertainment company with a lower cost base, according to a statement released by Meredith on Sunday. It was supported by a $650 million equity commitment from Koch Equity Development (KED), the investment and acquisition subsidiary of Koch Industries, owned by billionaire brothers Charles and David Koch. An additional $3.55 billion in debt financing was secured from four large financial institutions.

Headquartered in Des Moines, Iowa, Meredith publishes magazines such as MidWest Living, FamilyFun and Better Homes & Gardens and owns 17 television stations. Cost synergies resulting from the takeover are estimated to be $400 million to $500 million in the first full two years. The combined company will likely serve about 200 million American consumers across digital, television, mobile, and social platforms, with joint 2016 revenues pegged at $4.8 billion, including $2.7 billion of total advertising sales.

Accelerating its digital position by adding scale, the deal is expected to transform Meredith into a Top 10 digital media company with 170 million unique monthly visitors in the US, more than 10 billion annual video views, and nearly $700 million in digital advertising revenues.

“This is a transformative transaction for Meredith, and follows fiscal 2017 in which we posted the highest revenues, profit, and earnings per share in our 115-year history,” Meredith’s Chief Operating Officer Tom Harty said in the statement.

Meredith, which will continue to pay its current annual dividend of $2.08 per share, signaled the deal will probably be accretive to free cash flow in the first full year of operations. It said the increased scale and free cash flow alongside cost synergies will help in “aggressively” paying down debt and achieve a leverage ratio of about 2 times by 2020.

Shares in Time were up 9.8% in recent pre-market trade on Monday. The transaction is expected to close in the first quarter of 2018.

Companies: Meredith Corporation

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