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Meredith announces completion of Time Inc. acquisition

Meredith Corporation announced it has completed its acquisition of Time Inc., and that today (February 1 2018), will be the first day of operations for the combined company. Time Inc. shareholders received US$18.50 per share in an all-cash transaction valued at $2.8 billion originally announced on November 26, 2017.

Meredith also announced fiscal 2018 second quarter and first half results today - more details below.

"With this acquisition, we are creating a premier media and marketing company serving 200 million American consumers that's positioned for growth across industry-leading digital, television, print, video, mobile, and social platforms," said Meredith Corporation Chairman and CEO Stephen M. Lacy. "The combined portfolio joins the rich content-creation capabilities of many of the media industry's strongest national brands with a powerful local television business that is generating record earnings."

"I want to welcome our new employees to Meredith," said Meredith President and Chief Operating Officer Tom Harty. "Together, we are eager to start serving consumers and advertisers alike with trusted, premium multi-platform content and innovative marketing solutions. Since our announcement, teams from Meredith and Time have been developing an integration plan that has positioned us to hit the ground running. We look forward to delivering on our pledge to achieve the identified synergies and grow shareholder value."

 

Meredith Time Inc announcement ()

 

Key strategic and financial benefits of the Time Inc. acquisition:

  • Creates an unparalleled portfolio of national media brands with greater scale and efficiency – Combined, Meredith's brands now have a readership of more than 135 million and paid circulation of nearly 60 million, with leading positions in entertainment, food, lifestyle, news and sports, parenting, and home content creation, as well as enhanced positions in the beauty, fashion, and luxury advertising categories.
  • Continues the strong and growing contribution from Meredith's Local Media GroupMeredith's portfolio of 17 high-performing television stations in 12 markets is a consistent generator of strong cash flow. Meredith's stations — which reach 11 percent of U.S. television households — are primarily Big 4 network affiliates located in fast-growing markets.
  • Advances Meredith's digital position by adding significant scale – Meredith is now a Top 10 digital media company with approximately 170 million monthly unique visitors in the U.S., over 10 billion annual video views, and nearly $700 million in annualized digital advertising revenues. Meredith is well-positioned to benefit from fast-growing advertising platforms, including native, video, shopper marketing, programmatic and social. It now operates the No. 1 premium content digital network for American consumers with unmatched reach to Millennials, including 85 percent of U.S. Millennial women.
  • Provides consumer revenue diversification and growth – Meredith expects to increase consumer revenue from diversified streams, including bundled circulation activities that leverage its reach to nearly 60 million individual magazine subscribers; brand licensing; and e-commerce.
  • Enhances financial strength and flexibility – Meredith expects the acquisition will be accretive to free cash flow in the first full year of operations. Meredith anticipates generating annual cost synergies at the high end of its previously stated range of $400 million to $500 million in the first two full years of combined operations. Meredith has an excellent track record of achieving cost synergies with prior acquisitions, and is confident in its ability to optimize the cost structure of the combined business.
  • Increases Total Shareholder Return Meredith remains committed to delivering top-third Total Shareholder Return. On January 27, 2018, Meredith raised its annual dividend 4.8 percent to $2.18 per share, the 25th straight year it has raised its dividend. Meredith has now paid a dividend for 71 consecutive years.

"This portfolio of media assets offers advertisers and marketers unparalleled reach to American consumers," Harty said. "In particular, we are creating a powerful digital media business that enhances Meredith's leadership position in reaching Millennials."

Financing highlights

To finance the transaction, Meredith secured the following:

  • $1.8 billion of senior secured term loans (Term Loan B) maturing in 2025 and priced at LIBOR plus 3.00 percent
  • $1.4 billion of senior unsecured notes maturing in 2026 and priced at 6.875 percent
  • $350 million of a five-year senior secured revolving credit facility that is currently undrawn
  • $650 million investment from a private equity firm

These proceeds were used to finance the acquisition, refinance existing debt and pay transaction costs.

Meredith report fiscal 2018 second quarter and first half results

Meredith today reported fiscal 2018 second quarter earnings per share were $3.49, compared to $1.58 per share in the prior-year period. Fiscal 2018 second quarter results included the following special items:

  • A benefit of $2.92 per share related to changes to the U.S. corporate income tax rate
  • Transaction expenses of $0.23 per share related to Meredith's acquisition of Time Inc.
  • A charge of $0.34 per share related to the impairment of a trademark and a realignment in Meredith's National Media Group

Excluding these special items, fiscal 2018 second quarter earnings per share were $1.14. This compares to earnings per share excluding special items of $1.30 in the prior-year period. As expected in an off-election year, Meredith recorded $38 million, or $0.52 per share, less of high-margin incremental political advertising revenues in the second quarter of fiscal 2018 than in the prior year.

"We were quite pleased to report record earnings per share for a non-political second quarter and first half, driven by strong growth in non-political advertising revenue in our Local Media Group, along with record digital performance and solid expense discipline in our National Media Group," said Lacy. 

Read the full details of the report here.

Meredith is a member of FIPP.

 

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