Australian Newsagency Blog

A blog on issues affecting Australia's newsagents, media and small business generally.

Surprise, surprise: Bauer Media to be acquired by Mercury Capital

Mark Fletcher
June 17th, 2020 · 3 Comments

It turns out the speculation months ago was right. Bauer media is being sold to Mercury Capital – subject to government approval.  Here is the Bauer press release:

BAUER AUSTRALIA MARKS NEW CHAPTER UNDER NEW OWNERSHIP

Sydney, 17 June, 2020: Bauer Media Group today announced the sale of its Australian publishing business to investment firm Mercury Capital, marking a new chapter for Bauer Australia after its acquisition of Pacific Magazines in April.

The binding offer from Mercury Capital involves all of Bauer Media Australia’s titles from across the Women’s Entertainment & Lifestyle; Fashion, Beauty & Health; Homes; Food; Motoring & Trader lifestyle categories. The agreement also includes those titles recently acquired by Bauer from Pacific Magazines, as well as Bauer’s New Zealand mastheads.

Veit Dengler, Bauer Media Group COO said: “We have been proud to be the custodian of these iconic titles in Australia. I am confident that under Mercury’s ownership they will continue to thrive.”

Brendon Hill, Bauer Media ANZ CEO, says: “This signals an exciting new chapter for the business. With new ownership and our bolstered portfolio, we have unparalleled opportunities to connect with more Australians than ever before and continue our strategy of digital growth and innovation.

“We have increased flexibility to diversify revenue streams and grow and innovate across our multi-platform offerings. Additionally, we are well placed to invest in the key drivers of future success – high-quality content and digital development which is good for us, our audiences, clients and the Australian industry as a whole.”

Bauer’s expanded portfolio of 43 brands now reaches six in ten Australian women each month; more than 6.5 million women each month across magazines, websites, video, social, customer review sites, podcasts and experiences; a print readership of 6.8 million per year and social connections of more than 30.5 million.

“Despite the challenges presented by COVID-19, we have seen significant growth in subscriptions and digital audiences across our food, home, youth and fashion brands, demonstrating that Australians still love and read our brands. We have seen great vision, success and growth under Bauer Media Group ownership and now look forward to working alongside Mercury Capital to build on this growth under a new brand in the future,”Hill says.

The sale is subject to regulatory approval with the transaction expected to be complete in mid-July and the new brand to be announced in the coming months.

ENDS

The question will be: what does this mean? The folks at Bauer will say it is business as usual. I get that. However, it is never business as usual after any acquisition. Businesses are sold for a reason just as they are bought for a reason. Change is inevitable.

While I have no inside knowledge, looking at sales, ad revenue challenges, print media challenges and other factors, I expect we will see changes to the title mix, editorial focus and distribution arrangements.

Mercury Capital is a private equity business. Their objective is to get a return on their investment. Their actions with the business will depend on the timeframe over which they want to achieve the desired return. I say that as cost cutting focusses on shorter term return whereas investing in the actual products is riskier and would take longer to achieve a return.

Even though the reported purchase price of $50M (or less) is bargain basement, driving a return in this market (Covid or not) presents challenges.

Regardless of what Mercury does with the business, Australia’s largest magazine publisher has more disruption ahead and that will ensure disruption for all of us involved in magazine distribution and sales.

Whereas years ago, magazines were a core traffic driver for newsagency businesses, today the category is nice to have but not core. Many newsagents have transitioned focus to other more commercially valuable product categories.

25% gross profit is low for businesses confronted by annual rent and labour cost rises. 25% gross profit for products with suppressed retail prices makes magazines even less appealing. I think this is a reason we are seeing major retailers less interested in the category.

Let’s see what happens. Change, however, is inevitable.

15 likes

Category: magazines · Media disruption · Newsagency challenges

3 responses so far ↓

  • 1 Eddy // Jun 19, 2020 at 6:55 PM

    I like the comment about major retailers losing interest in magazines, it’s taken this long for them to figure out that they are sxx house at selling them there’s no interaction. Mags still have a buzz about them it’s special interest that sells

    0 likes

  • 2 Mark Fletcher // Jun 20, 2020 at 7:08 AM

    Eddy I agree. The low GP% and the flat cover price movement means magazines are falling behind in real terms, which our operating costs increase.

    Their business grew from a time when they were in control with products newsagents wanted to stock. Today, with traffic being generated by there categories from which we make 50% and more, the roles have reversed.

    0 likes

  • 3 Steve // Jun 20, 2020 at 1:26 PM

    Yes a worrying change of ownership and messaging from Bauer. Despite strong current demand for printed magazines we are noticing less and less titles.This combined with the current uncertainty can only lead to less floor space in our store devoted to this product line.

    As you say other product lines provide greater margins for us and we certainly don’t experience the same supply issues.

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