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Ripplewood, Zelnick Nab Time Life
January, 6 2004
Daily Deal, 01.06.04
Peter Lauria

Ripplewood Holdings LLC and ZelnickMedia Corp. announced Monday, Jan. 5, the acquisition of Time Life Inc., the venerable book, music and video arm of Time Warner Inc.'s magazine division, Time Inc.

The deal follows Ripplewood's and ZelnickMedia's acquisition last year of catalog retailer Lillian Vernon Corp. for $60 million. Time Life will be added to Direct Holdings Worldwide LLC, the company set up to house Lillian Vernon, and is expected to add about $350 million in annual revenue, giving the venture total yearly revenue in excess of $500 million.

Terms of the deal were not disclosed, but ZelnickMedia partner Jim Friedlich said the transaction's structure would include a cash payment as well as an ongoing yearly royalty payable to Time Inc. based on future sales performance. Aside from collecting royalties, Time Inc. will have no other involvement with the company - ZelnickMedia will handle day-to-day management of the company.

Discussions among Ripplewood, ZelnickMedia and Time Inc. stretch back to Memorial Day 2002, when Friedlich said his firm was first approached about a sale. Talks soon subsided, and Time Inc. began working on an internal restructuring plan before reapproaching the tandem in September.

"This wasn't an auction situation," Friedlich said. "They wanted to do a deal with us."

Friedlich added that the two companies worked intensively from late September until Dec. 31 to meet a deadline agreed upon by Time Warner CEO Dick Parsons and ZelnickMedia's namesake, Strauss Zelnick.

Time Inc. chairman and CEO Ann Moore confirmed as much on announcing the deal Monday. "We wanted to be certain that the Time Life brand would go to an organization that is highly qualified to carry on its values and traditions. Under Ripplewood and ZelnickMedia, Time Life is well positioned to accomplish these objectives."

Zelnick, who used to run Bertelsmann AG's music unit, will assume chairman and CEO duties at Direct Holdings Worldwide.

Among Time Life's assets are music compilations such as Classic Country, Songs for Worship and the Ultimate '70s Collection. Its video line includes "Best of" titles for Ren & Stimpy, the Muppets, Beavis & Butt-head and Saturday Night Live.

Known primarily for its publishing forays, Time Life has in the past few years been inactive in that space. Friedlich, however, expects that to change.

"That's an area we intend to ramp up," he said.

Andrew Vogel of Ripplewood and ZelnickMedia handled the deal's financial aspects for that side, while Maurice Edelson, director of strategic planning for Time Inc., represented his company. Dan Clivner of Simpson Thacher & Bartlett LLP served as legal counsel for Ripplewood and ZelnickMedia. William Burke and John Gaffney of Cravath, Swaine & Moore LLP handled those duties for Time Inc.