In 1989, print magazines were a safe—even smart—investment. That’s when buyout firm Kohlberg Kravis Roberts & Co. formed Primedia, positioning it as a roll-up of cash-flow-spitting media assets that could mint a healthy return in three to five years.
Fast-forward to 2011, and Primedia has become one of private equity’s oldest deals. Under KKR, the company spent the early ’90s scooping up hundreds of magazines, the action driven by an internal M&A dream team known as the “Deal Factory.” Led by Mark Colodny and Ian Highet, now both PE barons themselves, the buying spree was impressive—KKR deployed at least $1.1 billion of its own capital to buy titles like New York, Tiger Beat, and Arabian Horse World. But despite a well-received IPO in 1995, the Deal Factory’s flow did little to make Primedia worth more than the sum of its parts.
By 1999, Primedia founder and CEO Bill Reilly was pushing to exit the already too-old investment through a sale to European media conglomerates. Instead KKR injected Primedia with some irrational dot-com era exuberance, a decision that cost the company Reilly—and the market’s faith. Under his successor Tom Rogers, Primedia took on debt to buy pricey digital properties like About.com, which a key shareholder called “a horrible mistake”—a mistake that is now an important revenue generator for The New York Times Co.
Meanwhile, it was selling magazines, many at a discount to their purchase price, while other PE players like Bruce Wasserstein generated better returns with their magazine roll-ups in the 2000s. As print advertising declined in the decade, so did Primedia’s stock. KKR tried to protect itself through debt buybacks and dividends, but back-of-the-envelope math shows the firm’s sale of the company will be a money loser. This month fellow buyout firm TPG Capital agreed to end KKR’s Primedia position for $525 million. A long and winding road indeed.