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Time again

27 January 2016 By Jennifer Saba

Meredith may have to go back to her old love interest. The U.S. magazine and TV group was just jilted by Media General, which ran off with Nexstar Broadcasting instead. Meredith previously had been flirting with Time Inc before it parted from Time Warner. Nearly two years have passed, which could mean there’s a chance for the two publishers to rekindle their relationship.

After Meredith struck a $2.4 billion deal with Media General in September 2015, Nexstar swooped in with a better offer. Like any heartbroken bride, Meredith was reluctant to back off. It finally did on Wednesday, thus ending another chapter in its merger soap opera. It gets a $60 million parting gift and some proceeds from whatever TV spectrum Media General sells in an upcoming auction.

It was an odd corporate marriage anyway. Media General had offloaded its newspapers, meaning it would have created a bigger local TV company with a collection of women’s magazines like “Family Circle” attached. A better fit for Meredith is probably Time Inc, home to “People” and “Sports Illustrated.” Time Warner spun it off in June 2014, which means a two-year anniversary is approaching that frees it up to contemplate a deal again without jeopardizing the tax advantages of the separation.

Meredith has benefited from diversification. Its 17 TV stations contributed nearly 60 percent of its EBITDA for the six months ending in December. Investors value those earnings at 8.7 times compared to peers who command a multiple closer to six, around where Time also trades.

Uniting with $1.6 billion Time could deliver meaningful cost savings. What’s more, Meredith, whose EBITDA margin is about 20 percent, might be able to help improve on Time’s 15 percent. With Time’s stock down more than 60 percent since it was ejected from its parent company – and its revenue prospects looking dim – it should be more willing to consider running back into Meredith’s arms.


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