Time Inc Acquires Grupo Editorial Expansion: The Insider Story
Time Inc's acquisition of Mexico's Grupo Editorial Expansion (GEE) is the first large acquisition of a Mexican publisher by a U.S. publishing house. It has promising and interesting implications for the Mexican and Panregional publishing and advertising markets.
- What was the value of the transaction? Mexican publishing sources tell Portada® that they estimate that the multiple of the transaction lies around 8-9 times EBITDA (Earnings before interest taxes and amortization). Grupo Editorial Expansion annual sales are US$50 million a year. If we estimate an EBITDA margin of approx. 15% (US$ 9 million a year), the value of the transaction lies between US$72 million and US$81 million. The purchase price was probably somewhat lower; cable news network CNN, a unit of Time Warner, said that Time Inc. paid US $60 million to Medcom, Grupo Editorial Expansion's holding company. AdMedia Partners, a New York media investment banking firm represented Grupo Editorial Expansión in its acquisition by Time Inc.
Impact on the Mexican Magazine Publishing Market
The acquisition gives Time Inc. a bigger footing in the Mexican media market. Consumer demand in Mexico has grown steadily in recent years, amid stable economic conditions. An executive of a leading Mexican publishing company tells Portada® that the “entrance of Time Inc. will be very positive for the Mexican publishing sector. It will be positive for both readers and advertisers. Time Inc's purchase may also open the appetite for other international publishers to acquire local publishers. Time's executives will also provide a higher degree of professionalism to the market,” he concludes.
- What it means for the U.S. Hispanic market
With more than 60% of U.S. Hispanics coming from Mexico, the U.S. Hispanic market is a natural extension for a Mexican publisher. Editorial Expansion owns a lot of content resources and now can access the Time Inc's marketing and distribution clout. Time Inc accounts for nearly a quarter of the total advertising revenues of U.S. consumer magazines. Some of Expansion's titles, like Quien, could easily be marketed to the growing Hispanic market in the U.S. or to other parts of Latin America. Expansion's chief executive, John Reuter, is an American who, who headed strategic planning for Latin America for Time Inc. Sources at Grupo Editorial Expansion tell Portada® that GEE is studying different options regarding entering the U.S. Hispanic market.
In 1998, Grupo Editorial Expansion was acquired by Grupo Medcom, owned by the Mexican Serna family and by the Canadian pension fund La Caisse de Depot et de Placement du Québec. Since then its sales increased from U.S. $9 to US $50 million and the number of publications it publishes increased from 4 to 15, including Expansión, GEE's flagship magazine and Mexico's leading business magazine, Quién, a bi-weekly celebrity/personality magazine, Chilango, an Urban magazine about Mexico City, and Vuelo (custom publishing magazine).
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