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2017-04-28 21:38:03
Time Inc. Decides Not to Sell Itself

Time Inc. has decided to go it alone, choosing a path filled with challenges that no legacy publisher has completely mastered.

On Friday, the magazine company, home to Sports Illustrated, People and Time, said its board had determined it would remain independent and not sell itself, ending a monthslong bidding process that had involved several suitors.

Instead, the company said it would pursue the strategic plan its new management team had laid out, which includes increasing its digital audience and pursuing new opportunities for revenue growth.

“This is a great company,” Rich Battista, the chief executive of Time Inc., said in an interview Friday morning. “We think there’s tremendous untapped potential, and we’re just scratching the surface.”

With the decision, Time Inc., the most storied magazine company in the country, ended months of ambiguity and anxiety over its future. But it began another uncertain chapter for the company at an increasingly tremulous time for the industry.

Print advertising and circulation revenues continue to fall, starving magazine companies of the lifeblood that long sustained them. Most publishers have shifted their focus to increasing nonprint revenue, but new revenue sources have yet to make up the shortfall. To compensate, publishers continue to slash costs, transforming themselves into leaner companies with fewer employees and diminished resources.

“They have substantial challenges ahead as a public company,” Reed Phillips, a media investment banker at DeSilva & Phillips, said about Time Inc. in an email. “There will be pressure from shareholders wanting to see growth at a time when the magazine industry is receding.”

Potential buyers circled Time Inc. for months, and the company’s board — while pointing out that it had not initiated a sale process — had been considering a number of options, including selling itself or bringing on an outside investor.

As recently as March, five parties, including the Meredith Corporation, the Des Moines, Iowa-based publisher of Better Homes and Gardens and Family Circle, expressed interest in buying Time Inc. in its entirety, according to people familiar with the bidding process. But one party, an investor group led by the Seagram heir Edgar Bronfman Jr., suddenly dropped out.

Time Inc. previously rejected an offer of at least $18 a share from Mr. Bronfman’s group late last year.

But despite rumblings of interest, the bidding process for Time Inc. dragged on without an agreement. About two weeks ago, the company’s board, worried about morale and the cloud of uncertainty, began considering whether to end the discussions, according to a person briefed on the process. On Thursday, the directors officially decided to call off the sale talks, the person said.

Meredith, which came to be considered the most likely acquirer, had been unwilling to pay what Time Inc. sought. The most significant issues for Meredith were concerns about pension liability connected to Time Inc.’s business in Britain, and Meredith’s inability to secure sufficient financing from banks because of Time Inc.’s financial situation, according to a person briefed on Meredith’s thinking.

But the person briefed on the process said the pension was nearly fully funded and that the company had affirmed its financial outlook for the year.

Time Inc.’s share price, which has been propped up for months on deal expectations, was down about 17 percent at the close of the market Friday.

This was not the first time Time Inc. flirted with a sale. Meredith considered buying it in 2013, but a deal fell through in part because Meredith reportedly did not want to buy several of Time Inc.’s best-known magazines, including Time and Sports Illustrated.

Founded in 1922 by Henry R. Luce, Time Inc. long embodied the free spending of the magazine industry, with offices overlooking Rockefeller Center and Radio City Music Hall. As a publisher of magazines that highlighted stellar photography and weekly updates on news, sports and celebrities, Time Inc. was an empire that left an indelible mark on American culture.

But like many magazine publishers, Time Inc. has struggled to adapt to a digital age. The brutal economics of the publishing industry have made that challenge more daunting. In the last decade, Time Inc.’s revenue and operating profit have fallen sharply. Its work force has dropped from 11,000 to just over 7,000.

Although Time Inc.’s challenges are endemic to all publishing companies, other forces have contributed to the company’s troubles. Executive churn has roiled the company for years, and cost cuts have bled off its resources. After Time Warner spun off Time Inc. in June 2014, the publisher struggled to find its footing. It has reported revenue declines each year since the spinoff.

But there have been some positive signs for the business. Mr. Battista, who took the helm of Time Inc. in September, and the new chief operating officer, Jen Wong, recently embarked on an aggressive strategy to increase Time Inc.’s digital revenue, including enhancing advertising technology abilities and offering customers paid services, such as a food-and-wine club.

Last year, advertising revenue increased 3 percent, driven by substantial growth in digital advertising. Executives project that digital advertising revenue will increase to more than $600 million this year and $1 billion in the coming years.

But Time Inc.’s overall financial results have yet to improve, in large part because the company is still tied to its declining print business. About two-thirds of its annual revenue is still derived from magazines.

The company will report its first-quarter earnings on May 10.

Time Inc. is aiming to make $100 million in cost cuts this year, and Mr. Battista said the company would continue to be aggressive about cost management, particularly in its print business. He did not rule out selling individual magazine titles.

Mr. Battista added that he was eager to continue transforming Time Inc. from a print publisher to a multimedia company. He planned to hold two town hall-style meetings with employees Monday morning.

“The focus right now is on executing on this plan and moving forward,” he said.

So for now, Time Inc. soldiers on.

Earlier this week, it held its annual black tie Time 100 gala to honor what it had deemed the year’s most influential people. In a glass-walled concert hall overlooking Central Park, celebrities and prominent media executives dined on poached Maine lobster and listened to performances by Demi Lovato and John Legend. Even the pouring rain could not ruin the night.