Bauer out of the money in mag sale

The magazine industry is struggling

Bauer Media may have sold its Australian business for less than the $40m it agreed to pay Seven West Media for the Pacific Magazines operation in recent weeks, sources say.

One source told DataRoom on Wednesday that the value of the transaction was somewhere between $40m and $50m after redundancy costs, but others close to the situation say it was far less than $40m.

What is known for sure is that the amount was less than $50m and a far cry from what Bauer paid the Packer family in 2012 when it outlaid $525m for the Australian and New Zealand operation.

It takes its losses in Australia to about $600m.

Market experts believe a price of less than $40m was possible for the business, which owns 43 magazine titles including Women’s Weekly, Woman’s Day and New Idea.

The German family-owned group had hired EY to review the Australian business earlier this year and opted to shut down its New Zealand titles amid COVID-19 trading restrictions.

At that time, there was thought to be a real chance that the Australian operation could be placed into administration, which would mean it could escape from its $40m contractual obligation to buy the magazines from Seven West Media, and this option was closely examined.

However, some believe that shutting down the overall operations could have been more costly than going forward with the acquisition and then selling the business for perhaps a smaller price. The deal is telling, showing just how badly things stand for not just the magazine market but for the Australian media industry as a whole.

Some suspect more job cuts could be on their way, particularly at outdoor advertisers, which are faring the worst of all mediums, and at newspapers and free to air broadcasters.

Some are questioning whether Nine Entertainment, publisher of The Sydney Morning Herald, The Age and The Australian Financial Review, could soon let the axe fall.

As reported by The Australian this week, advertising spending continues to worsen, falling about 48 per cent last month from a year earlier.

That compares to a 43 per cent drop in ad spending in April, according to UBS, citing data from industry group Standard Media Index.

The outdoor ad sector has been hit the hardest, down 72.8 per cent and 63 per cent in April.

Metropolitan radio and newspapers dropped 62.4 and 50.3 per cent, respectively, last month. That compares to 48 and 38 per cent falls, respectively, in April.

JPMorgan cites data from the SMI revealing overall metro television advertising spending fell 40.3 per cent year on year, an acceleration from the 29.1 per cent in April and worse than its predicted 35 per cent decline for the April to June period.

The analysts said Nine Entertainment and Ten Network’s revenue share rose year on year, while Seven West Media continued to lose share.