Hearst Makes Blockbuster Offer for Lagardère's Mags

Recent years have seen a spate of magazine distress sales, but as the first green shoots of a rebound are being seen, there are at least some people out there who are willing to pay real money for print properties. Hearst Corp. has now officially offered to pay the equivalent of about $890 million for Lagardère’s international publications—far more than the $1 that had become the going price for iconic, yet faltering, magazine brands.
The price represents about 13 times EBIT (earnings before interest, taxes)—close to the high point of multiples paid for magazines just before the recession, estimated Reed Phillips, managing partner of media investment bank DeSilva & Phillips.
The price offered reflects Hearst’s belief that it can improve the properties through cost-cutting, however.
“On the surface, it appears to be high, but that’s because the earnings of Lagardère are soft,” Phillips said. “The true multiple is what Hearst can do with the synergies.”
With the binding cash offer made Jan. 31, Hearst—parent of Cosmopolitan, Esquire and other titles—would add over 100 international magazines for a total of more than 300 overseas editions. The deal, rumors of which were first reported by Adweek, would make Hearst the No. 2 publisher in the U.S. in terms of ad pages and, it’s believed, the biggest international publisher by number of editions. The sale is expected to close in the third quarter of 2011.
In the U.S., the deal would include Lagardère’s unit Hachette Filipacchi Media, publisher of Elle, Woman’s Day and Car & Driver. There, eliminating overlap in back-office functions like IT and circulation could produce 15-25 percent in cost savings, Phillips said.
Overseas, Hearst could find synergies in the markets where it would publish multiple titles. It would acquire publishing rights to Elle in 15 countries including the U.S., Russia, Spain and the U.K. Hearst already publishes Cosmopolitan in 14 of those countries and Harper’s Bazaar in 11.
“Hearst gets merger benefits in the states,” said Andy Buchholtz, managing director of investment bank Buchholtz & Co. “And, they’re betting on international print, that it’ll continue to thrive.”