Analysis: Grupo Expansion’s sale reflects substantial changes in the Mexican Magazine Market
What: Southern Cross Group has acquired Mexican magazine publisher Grupo Expansión (Gex), a Time Inc. subsidiary, for an undisclosed sum. The deal is still subjected to regulatory approvals. Following the acquisition, Gex will continue licensing the Time Inc. and Time Warner brands that are part of its portfolio.
Why it matters: The transaction reflects important changes in the Mexican magazine market. Earlier this year another major publisher, IASA Comunicacion, was sold to a Monterrey based investor group.
Southern Cross Group, a Latin-American private equity firm, is acquiring Grupo Expansión (GEx), a Time Inc. subsidiary, subject to regulatory approvals. Terms of the deal were not disclosed. GEx will continue to license the Time Inc. and Time Warner brands that have been part of the portfolio (CNNMéxico, InStyle, and Travel + Leisure) following the acquisition.
GEx was founded in 1966 and acquired by Time Inc. in 2005. It is Mexico’s second largest magazine publisher, after Editorial Televisa, with 16 titles* including Expansión, Quién, and Life & Style and 10 websites such as Mediotiempo and Metros Cúbicos and a monthly reach of nearly 30 million. Over the last years Grupo Expansion has heavily expanded to a digital multiplatform strategy to decrease its reliance on print advertising.
During 2013, GEx revenues represented less than 2% of Time Inc. combined revenues. Time Inc. revenues in 2013 were US $3.3 billion so that Grupo Expansion revenues were approximately US $66 million.
An important driver is the magazine sectors decreasing share to approximately 3% of the overall Mexican advertising pie.
Changes in the Mexican Magazine Market
The Mexican magazine publishing market has been undergoing substantial changes and facing challenges. An important driver of M&A activity is the magazine sectors decreasing share in the overall advertising pie (approximately 3%, US$ 190 million of the overall Mexican ad market, Source Cicom). Magazine publishers have been extending their brands to digital, events and Broadcast media properties. This requires capital. That could be one of the reasons why private equity investors like Southern Cross are now active in the magazine market. Earlier this year, Iasa Comunicacion, the publisher of Entrepreneur Mexico, Mexico Desconocido, Alto Nivel and many custom magazines, was sold by its former owner, Jose Maria Trillas-Trucy (Interview in Spanish), to a Monterrey based investor group.
Southern Cross Group's bet
“GEx is a successful multiplatform player with tremendous growth potential. We are confident that the company’s strategic plans focused on technological innovation, its leading brands and its strong management team are the right building blocks to achieve continued success,” said Cesar Perez Barnes, Partner at Southern Cross Group, Mexico. Southern Cross Group is one of Latin American largest private equity investor groups. Its portfolio includes relatively large companies across a wide array of industries.
“Time Inc.’s prime focus today is on growing core assets in the U.S. and U.K.,” said Joe Ripp, Chairman and CEO of Time Inc. “Therefore, we believe GEx will have better opportunity to maximize its value under the ownership of Southern Cross.”
Manuel Rivera, President and CEO of GEx, who will continue to run the company following the acquisition, commented: “I am extremely proud that Latin America’s largest independent private equity fund with almost 20 years experience in the region has chosen GEx as a portfolio company. Southern Cross Group is committed to preserving the good name and values of our company while significantly investing in its growth.”