When Will Meredith Spin Off Its Magazines?

Meredith posted revenue of $1.46 billion in its fiscal year that ended June 30. This compares to $1.47 billion in the same period the year before. Net earnings fell from $124 million to $114 million. Its national media base, made up mostly of its magazines and ancillary businesses, had revenue of $1.06 billion last year, compared to $1.09 billion a year earlier. Operating profits for the group dropped to $113 million from $138 million the year before. Revenue at its local media business, made up primarily of its televisions properties, rose to $403 million from $375 million. Operating profit fell from $124 million to $113 million. Local media operating margin was 28%. For national media, the number was 11%. Meredith has had several M&A events over the past three years that affect the numbers.

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Unlike many other media companies, Meredith’s print properties have some valuable assets outside its magazines. The print operation has a database division and makes an extraordinary claim about the business:

Meredith’s database is the largest of any U.S. media company. It includes 7 out of 10 women in America and 8 out of 10 homeowning households. If your ideal customer is passionate about healthy cooking and nutrition, we’ve got 28 million just like her — and we know how to find her.

The magazines also have a brand licensing division.

Meredith’s television division is made up of 12 stations, as well as websites the company says have 8.8 million unique visitors.

The advantages to a spin-out include the lack of faith Wall Street has in print and the chances that either or both the broadcast and print operations could be sold to media companies with similar properties. A marriage between Meredith’s print operations and Time Inc. was once part of M&A conversations, and it continues to be discussed by Wall Street analysts.

The decision about breaking apart the two companies is in the hands of controlling shareholders, as was the case with Rupert Murdoch and the spin-out of the News Corp assets. The Meredith family effectively controls the Meredith.

For Meredith, the question of a spin-out is the same as for other media companies that have decided to separate. Are two companies easier to understand for investors, and will they get radically different valuations? Recently, the answer to those questions has been yes.

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