KUHN CAPITAL Wednesday, December 13, 2017
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Primedia RIP

2/9/07

This morning, flawed media conglomerate Primedia announced its intention to sell its largest division, Enthusiast Media. The unit consists of 75 magazine titles like Motor Trend, Automobile, Hot Rod, Surfing and Soap Opera Digest, and accounts for about $500M of Primedia’s $825M in total sales.

Only yesterday management had announced its purchase of three magazines destined to join the Enthusiast Media group -- Modified Magazine, Modified Luxury & Exotics Magazine, and Modified Mustangs Magazine.

But that’s the way it goes with Primedia. Built through M&A and taken public by LBO firm KKR, the company was founded on the theory that niche magazine publishing could be made more efficient through production and marketing scale. Unhappily, it has spent the ensuing 18 years disproving that theory. For shareholders this has been a costly lesson: last quarter’s retained earnings clocked in at negative $2.8B while long-term debt hovers at $1.3B.

Primedia’s management says that selling its Enthusiast Media division will allow it to concentrate on its core business. That statement makes you wonder what management has learned. The problem all along has been that Primedia has no core business, unless you call “core” the buying and selling of media properties at a loss.

And what’s left after Enthusiast Media goes are rump ends: real estate listings publications and some education media – school videos, a school TV channel and a healthcare continuing education curricula.

Primedia’s stock popped 18% when management announced the decision to sell Enthusiast Media. We figure that’s because the company’s long-suffering shareholders see some hope that what’s left of their investment will be freed at last. Of course the process won’t be complete until the last property sells. And then the lenders owed $1.3B will be standing in line at the teller’s gate in front of the equity owners. RIP.


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