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​ZelnickMedia, Ripplewood Combine to Buy Publisher From Unit of Time Warner

Wall Street Journal, 01.06.04
Matthew Rose

NEW YORK -- Looking to concentrate on its core magazine business, Time Inc. agreed to sell Time-Life Inc., a music and video direct-marketing business, to Direct Holdings Worldwide LLC, a newly created direct-marketing operation owned by two private-equity concerns.

The parties wouldn't comment on the deal's value, which wasn't disclosed. Jim Friedlich, a partner at ZelnickMedia Corp., one of the private-equity players, said Time-Life has about $350 million in annual revenue. He said Direct Holdings paid for Time-Life partly in cash and partly through potential future royalty payments. ZelnickMedia co-owns Direct Holdings with Ripplewood Holdings LLC.

Time-Life, founded in 1961, is a fabled American brand that had particular resonance when Life magazine was a regularly published title. Although the unit mostly stopped producing books a few years ago and has fallen on hard times recently, it still retains significant cachet. With the creation of Direct Holdings, the two private-equity firms plan to unite Time-Life with Lillian Vernon Corp., a direct marketer of household, children's and gift merchandise, which they acquired in July 2003.

For Time Inc., the U.S.'s largest publisher of magazines, the deal rids it of a noncore asset that had been taking up a disproportionate amount of management energy. In good years, the unit earned as much as $30 million, but without hits to bolster the regular sales of music-compilation compact discs, it struggled. For the first nine months of 2003, the unit had a loss of more than $50 million, a total that included some restructuring charges. Time Inc. has been trying to free up capital for new magazines, such as a planned women's weekly title, and the sale will help ease the way.

Time-Life "is a terrific brand, known and trusted, and a great historical business," said Strauss Zelnick, ZelnickMedia's founder. It is, he added, "perhaps a little volatile for Time Inc.'s taste." Time Inc. is a unit of media behemoth Time Warner Inc., which has been shedding assets recently to pare its debt and focus on core businesses.

As part of the deal, Direct Holdings acquired a long-term license for the Time-Life brand. Mr. Zelnick, the former chief executive of Bertelsmann AG's BMG music division, said Direct Holdings plans to resurrect the unit's book-publishing business, although it likely will concentrate on less-expensive fare -- such as self-help and romance titles -- compared with the luxurious coffee-table books Time-Life used to produce. Time Inc. will continue to publish books based on its People and Life magazine franchises through a separate unit.