Source Interlink appears to work in the field of distribution, which should fit well with the Enthusiast Media division that produces dozens of magazine titles each month needing to find their way onto newsstands across the world. It appears that the purchase will make Source Interlink a vertically integrated producer and distributor of content from this point on. Though a copy of Motor Trend goes for about $4 on the newsstand, Source Interlink paid $1.2 billion for it and its siblings thanks to financing support from Citigroup Global Markets, Inc.
Like the sale of Chrysler to Cerberus, only time will tell if these sell offs benefit the seller, the sold and the buyer. You can read the full press release from Source Interlink detailing the sale after the jump.
[Source: Source Link via Winding Road]
SOURCE INTERLINK COMPANIES TO ACQUIRE PRIMEDIA'S ENTHUSIAST MEDIA SEGMENT
- Transaction creates vertically-integrated media company with leading content and a
powerful distribution and merchandising platform -
- Company expects transaction to be accretive to adjusted earnings per share
exclusive of one time costs -
Bonita Springs, FL, May 14, 2007 - Source Interlink Companies, Inc. (NASDAQ: SORC), a
leading provider of merchandising and fulfillment services for home entertainment products, is
pleased to announce that it has signed a definitive stock purchase agreement to acquire
PRIMEDIA Inc.'s (NYSE: PRM) Enthusiast Media division (EM) for approximately $1.2 billion.
The all-cash transaction combines EM's industry-leading magazine content portfolio, containing
over 70 magazine titles and 90 Web sites, with Source Interlink's premier magazine distribution
and merchandising platform, creating a leading vertically integrated media, publishing,
merchandising and distribution company.
To fund the acquisition, Source Interlink has secured a financing commitment from Citigroup
Global Markets, Inc.
EM is one of the largest providers of print and digital media content to the enthusiast community,
with more than 70 magazine titles, 90 Web sites, over 65 events, a television program, and 400
branded products. It is the # 1 special interest magazine publisher in the U.S., and its portfolio of
well-known niche magazine titles and content brands includes: Motor Trend magazine,
Automobile magazine, Hot Rod magazine, Lowrider magazine, Soap Opera Digest and Soap
Opera Weekly magazines, Power & Motoryacht magazine and, Surfer and Snowboarder
For fiscal year 2006, EM had revenues of $524.8 million. Source Interlink estimates that the
combined companies generate approximately $2.4 billion in revenue and more than $180 million
in EBITDA on an annualized basis. Source Interlink expects the transaction to be accretive to
adjusted earnings per share exclusive of one time costs.
The transaction is expected to close mid-summer, and is subject to regulatory approvals and other
customary closing conditions. Following the completion of the transaction, EM will operate as a
division of Source Interlink and will be headed by Steve Parr, EM's current president. He will
report to Michael Duckworth, Chairman of Source Interlink.
Michael Duckworth commented, "Our review of strategic alternatives is complete and our
direction is clear. Over the last several years Source has driven the consolidation of a fragmented
and inefficient channel for the distribution and merchandising of home entertainment content at
retail and the newsstand. This acquisition is a first step to leverage what we have built by
transforming Source into a fully integrated media company with both print and digital content.
EM's industry-leading special interest magazine titles and consumer Web sites diversifies our
earnings streams and accelerates our growth. Under the leadership of Steve Parr, EM has
developed a strategy for growth that capitalizes on the changes taking place in the media
environment. We welcome Steve and his team to Source and we look forward to building on the
solid foundation they have created."
"We are delighted with the end result of this process," said Dean Nelson, CEO of PRIMEDIA.
"We are able to emerge from this auction virtually debt free and completely focused on our
Consumer Source business. At the same time, we believe that Source Interlink will be a terrific
home for our Enthusiast Media Group and will continue to thrive under their ownership. We
thank the EM team for their hard work and commitment and we wish Steve Parr and the entire
team all the best."
About Source Interlink Companies, Inc.
Source Interlink Companies is a leading marketing, merchandising and fulfillment company of
entertainment products, including DVDs, music CDs, magazines, books and related items. The
Company's fully integrated businesses include:
• Distribution and fulfillment of entertainment products to major retail chains throughout
North America and directly to consumers of entertainment products ordered through the
• Import and export of periodicals sold in more than 100 markets worldwide
• Coordination of product selection and placement of impulse items sold at checkout
• Processing and collection of rebate claims as well as management of sales data obtained
at the point-of-purchase
• Design, manufacture and installation of wire fixtures and displays in major retail chains
• Licensing of children's and family-friendly home entertainment products
Source Interlink serves approximately 110,000 retail store locations throughout North America.
Supply chain relationships include movie studios, record labels, magazine and newspaper
publishers, confectionary companies and manufacturers of general merchandise. For more
information, please visit the company's website at http://www.sourceinterlink.com.
About PRIMEDIA Inc.
PRIMEDIA Inc. is the parent company of Consumer Source Inc., the #1 publisher and distributor
of free consumer guides in the U.S. with Apartment Guide, Auto Guide, and New Home Guide,
distributing free consumer publications through its proprietary distribution network,
DistribuTech, in more than 60,000 locations. Consumer Source owns and operates leading
websites including ApartmentGuide.com, AutoGuide.com, NewHomeGuide.com; and America's
largest online single unit rental property business, comprised of RentClicks.com,
RentalHouses.com, HomeRentalAds.com, and Rentals.com.
Safe Harbor Statement-Source Interlink:
This press release contains certain "forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995, including
statements relating to, among other things, (i) timing of the transaction, (ii) future business plans,
strategies and financial results, and (iii) growth potential.
These forward-looking statements reflect Source Interlink's current views about future events and are
subject to risks, uncertainties, assumptions and changes in circumstances that may cause future events,
achievements or results to differ materially from those expressed by the forward-looking statements.
Factors that could cause actual results to differ include: (i) the challenges and costs of closing, integration
and restructuring, (ii) interest rate volatility and the impact of a significant increase in the Company's debt
service obligations, (iii) market acceptance of and continuing retail demand for physical copies of
magazines, books, DVDs, CDs and other home entertainment products, (iv) our ability to realize additional
operating efficiencies, cost savings and other benefits from the acquisition, (v) an evolving market for
entertainment media, (vi) regulatory or other delays in completing the proposed purchase in a timely
manner or at all, (vii) the challenges maintaining relationships with suppliers; (viii) adverse changes in
general economic or market conditions; (ix) the ability to attract and retain employees pending
consummation of the transaction; (x) intense competition in the marketplace and (xi) other events and other
important factors disclosed previously and from time to time in Source Interlink's filings with the Securities
and Exchange Commission, including its Annual Report on Form 10-K filed with the Securities and
Exchange Commission on April 25, 2007.
Source Interlink does not intend to, and disclaims any duty or obligation to, update or revise any forward-
looking statements or industry information set forth in this press release to reflect new information, future
events or otherwise.