Media24 acquisition of Primedia mags ‘no surprise'

Media24 finally released the official press release this morning, 11 November 2009, following much speculation and a series of articles concerning the buyout, which were published in early October. At the time, no one from Media24 or Primedia Publishing was willing to comment on the pending deal, but it was clear that Primedia staff were aware of the situation.

According to the official release, Primedia Publishing will be incorporated into the Media24 Magazines Division and will henceforward be known as Media24 Business Magazines. It will continue to run under current MD Jacques Breytenbach.

Industry commentators are not surprised by the move (especially given the leak over a month previously!).

Acquisition makes sense

Group managing director of the Starcom MediaVest Group Gordon Patterson says that it makes complete sense from a business perspective for Primedia to be refocusing its efforts under its new CEO Kuben Pillay.

“… any area not performing to minimum levels or requiring expertise that is in short supply within Primedia will certainly be under the spotlight,” he says.

It is understood that the division has been operating profitably, despite the tough economic times, but Pillay acknowledges in the official release that:

“Traditional publishing had gradually become non-core to the group, and as such our ability to develop our personnel and afford them the career development opportunities they deserved was severely inhibited.”

Insiders agree with this statement, commenting that the division felt somewhat “excluded” from the major operations, and that the company had long since ceased to invest significantly in the division.

Media24 the obvious target

Pillay's statement continues: “We found ourselves unable to effectively leverage the publishing business and therefore sought to find a buyer who could exploit the synergies more successfully, and benefit from the additional scale.”

Media24 was the obvious target, not having previously focused on the business-to-business sector, but clearly possessing general publishing expertise as well as crucial access to printing presses via its 87.5% interest in Paarl Media Holdings (PMB), one of the most extensive commercial printing operations in South Africa.

The acquisition of Primedia Publishing brings with it 17 titles, the vast majority of which are heavily industry focused; the likes of Advantage, DIY Trade News (which focuses on the hardware industry), Environmental Management, Film Finesse, Front Shop (aimed at the pharmaceutical industry), Leading Architecture, and Molato (the Department of Mineral and Energy's Stakeholder publication).

It seems a strange time to invest in a business-to-business publishing unit, a sector of publishing that typically takes a hard hit during tough economic times.

'As good a time as any to invest in future growth'

But CEO of Media24 Magazines John Relihan comments that, “The economy is bound to recover and we expect this already strong and healthy business unit to follow. A downturn is as good a time as any to invest in future growth.”

He adds that despite having not previously invested in this type of publishing, the company finds the category “interesting” and it will make up for its lack of knowledge in the sector by retaining “the existing high level of expertise that we have in MD Jacques Breytenbach and his team”.

For the moment, that means the staff complement of 26 and their 17 titles can breathe a little easier. There has been much speculation as to Media24's intent, and what some believe to be a cutthroat corporate style.

Says Relihan: “Our philosophy has always been to not try and fix something that works. Except for the name change and the unit moving office, it is business as usual for Business Mags 24.”

Opinions divided

He does, however, qualify that with the statement that, “It is indeed too early to make any predictions and/or judgments on individual titles.”

Industry commentators are divided on what this acquisition means for the market:

Patterson believes that the move is definitely in the best interests of the titles concerned.

“Media 24 has the size to deliver economy of scale benefits which in turn will improve the product from a reader perspective as well as from an advertiser perspective. The opportunity to integrate the Primedia titles into Media24 should not be underestimated as this will create a formidable competitive offering,” he says.

But Mediacompete CEO Paul Wilkins adds that the other side of this coin is not so pretty:
“It seems to me that we're heading in the direction of a magazine monopoly,” he said, “and that's worrying.”

Relihan retorts that: “This transaction cannot even remotely be regarded as creating a monopoly; there are other much bigger players in the B2B arena in South Africa.”