Mercury Capital buys out Bauer Media Australia

The sale of Bauer’s magazine business takes its Australian losses to around $600m. Picture: Supplied

German publisher Bauer Media has called time on its disastrous stint in Australia by selling its recently enlarged magazines business to private equity firm Mercury Capital for less than $50m, a fraction of the $500m it splashed out to secure the Packer family’s ACP mastheads in 2012.

The family-owned company, which owns hundreds of magazines and radio stations across Europe and the US, hasn't publicly disclosed the sale price, but The Australian’s DataRoom understands that Mercury will pay $40m, plus redundancy costs, totalling less than $50m.

The deal was struck in the early hours of Wednesday morning after DataRoom tipped that it was expected to happen this week, and comes about six weeks after Bauer paid $40m for Seven West Media's Pacific Magazines business.

The sale price is the same that Bauer paid Seven for Pacific, plus another $7m, according to one source. That puts a value on Bauer’s Australian magazine business of about $7m and takes its losses in Australia up to about $600m.

Bauer recently suspended eight Australian mastheads — NW, OK!, Harper’s Bazaar, Elle, InStyle, Men’s Health, Women’s Health and Good Health — and axed staff in a bid to offset the double digital fall in advertising revenue across the local media sector during the coronavirus crisis.

Two months ago, the group shuttered its New Zealand magazine operations and sacked more than 230 staff.

Despite the sale, Bauer chief operating officer Veit Dengler said the company "remains committed to magazine publishing".

"This decision supports our strategy to invest in our market leading brands where we believe we are best placed to do so.”

“We have been proud to be the custodian of these iconic brands in Australia,” he said.

Bauer will now turn its focus on its “massive diversification strategy”, including digital marketing and online comparison operations, according to local boss Brendon Hill.

Mr Hill and his executive team would stay on and work with Mercury over the next two to three months on a new strategy for the business, which consists of 43 magazines including Women’s Weekly and Woman’s Day. That includes a new name for the business, subject to the availability of a web address, and boosting ad revenue.

“I can categorically say from my point of view, not Mercury’s, that magazines are going to around for a very very, very long time. They’re a huge product, we reach over 6.5 million people every month with them,” Mr Hill told The Australian.

Mr Hill, who has worked for Bauer for 15 years, is hoping to resume the publication of the eight titles that were temporarily suspended in September or October, subject to the ad market and the reopening of airports.

He is cautiously hopeful of a recovery in the local ad market. “The last three or four weeks have been really promising, compared to where we were. So there are some green shoots out there, which we are watching very closely.”

Under the deal, Mercury will acquire all of Bauer’s local print and digital assets, including women’s entertainment & lifestyle; fashion, beauty & health; homes; food; motoring & trader lifestyle categories.

It also includes brands recently acquired by Bauer from Pacific, including New Idea and Better Homes and Gardens, plus Bauer’s NZ mastheads, which are for sale.

Mr Hill said there has been “a lot of interest” in Bauer’s NZ operations, including NZ Listener, Woman’s Day, New Zealand Woman’s Weekly, North and South and Next, plus a digital network. But it is now up to Mercury to decide what to do with them.

Mercury is run by former Goldman Sachs banker Clark Perkins, who had been in talks to buy the Bauer’s Australian business last year once the Pacific deal was completed. But the private equity firm backed away from a deal when the Australian Competition & Consumer Commission raised red flags about the transaction in December, which have since been resolved.

Talks recently resumed with Mercury, which owns the Blue Star printing company that printed the Bauer New Zealand magazines before the division was shut down.

It is thought that Bauer, run by Yvonne Bauer for the past decade, had been reluctant to complete the Pacific transaction due to the COVID-19 trading conditions but executed the deal because it was legally bound to do so.

The sale of Bauer’s local operations to Mercury is subject to relevant regulatory approvals in Australia, with completion expected by the end of July.