Meredith to use the sale of its local media group to grow national publications into multi-platform brands

By Kayleigh Barber

Earlier this month, Meredith announced it was selling its Local Media Group to Gray Television in a $2.7 billion cash deal, leaving the company’s future success solely on the shoulders of its National Media Group once the sale finalizes later this year.

“The transaction significantly improves Meredith’s financial strength,” said CEO Tom Harty in an email to Digiday, adding that post-sale, Meredith is expected to be twice as profitable in its adjusted EBITDA.

The plan for now is to use those profits to bolster the national titles that remain in Meredith’s portfolio and focus on organically growing into more of a multi-platform publisher, according to Catherine Levene, president of the National Media Group, which houses more than 40 magazines and digital brands including Better Homes & Gardens and People.

The deal was not done in an effort to drop an under-performing business. In fact, despite the economic downturn during the pandemic, the Local Media Group did not struggle in 2020. According to Meredith’s 2021 second quarter earnings report, which rounded out the 2020 calendar year between Oct. 1 and Dec. 31, the LMG had a 53% increase in total revenues for that division year over year to $328.4 million, with political advertising increasing by over 100% year over year.

The third-quarter earnings report, which covers the calendar year’s first quarter of Jan. 1 to March 31, showed that the LMG was up 3% in total revenue, earning just over $200 million. Political advertising was down 59% year over year, given the Presidential election took place the previous quarter, but non-political advertising was up 5% year over year.

“The stars aligned” in 2020 for this division to earn a valuation as high as $2.7 billion, according to one media consultant who spoke on the condition of anonymity. That’s because the Presidential election led to a once-in-four-years boom in political advertising revenue and increased local viewership during the coronavirus pandemic led to a boost in non-political ad revenue as well. They added that an offer this high likely would not have come around again for another four years, if at all.

Meredith is “a magazine company at heart,” said the media consultant. “I don’t think I could have imagined [the reverse of] them selling the National Media Group and keeping the Local Media Group.”

Levene said that the LMG had been courted for years with offers but this was a competitive offer that came at the right time.

The consultant added that the money from the sale will most likely be used to pay down debt and hopefully increase its stock price as a result. As of March 31, Meredith still held $2.6 billion in debt, according to the company’s third quarter earnings report, most of which was accrued from buying Time Inc. in 2017 for $2.8 billion.

“It provides a great return for our shareholders,” said Levene. “But it also allows us to strengthen our balance sheet and make us more flexible for growth investments.” …read more

Source:: Digiday