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News > Deals
Primedia buys About.com
October 30, 2000: 3:40 p.m. ET

Magazine publisher buys dot.com for $690M, blending old and new media
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NEW YORK (CNNfn) - Primedia Inc., publisher of Seventeen magazine, agreed Monday to acquire Web media company About.com Inc., in a $690 million stock deal that combines a content-rich "old media" fixture with a popular Internet information destination.

The deal brings together the content of Primedia's deep periodical roster, which includes Modern Bride, Automobile, American Baby and New York, with About.com's distribution machine and its 21 million unique monthly visitors. New York-based About operates a network of over 700 topic sites, sorted into 36 areas and 50,000 subjects.

graphicThe pact is also another high-profile move by Primedia's leader, chairman and chief executive Tom Rogers, a television industry veteran hired a year ago to energize the company's growth by focusing on its broadband, Internet and e-commerce properties.

Under the pact, New York-based Primedia Inc. (PRM: Research, Estimates) will swap 45.2 million shares for About.com's 18.1 million shares, valuing the deal at $690 million based on Primedia's closing share price of $15.25 on Friday. About.com shareholders will receive 2.3409 Primedia shares for each About share. Primedia is paying about $35.70 a share, a 50 percent premium over About's closing price on Friday.

"We are the kings of offline niches," said Primedia's Rogers. "We are convinced that the future of the media world is the confluence of new and old media tied together."

About's purchase price is significantly below its 52-week high of $105.81, reflecting investor unease with dot.com advertising, analysts said.

However, the deal is viewed as one of the first, outside of the merger between Time Warner Inc. (TWX: Research, Estimates), the parent of CNNfn.com, and America Online Inc. (AOL: Research, Estimates), where an online company will become a significant part of a traditional media company.

graphicMajority owned by Kohlberg Kravis Roberts & Co., Primedia is a $1.7 billion company that prints some 270 publications, and also owns Channel One, the school-targeted TV network.

By contrast, Scott Kurnit in February 1997 founded the Mining Company, which in 1999 took on its current moniker, About.com, and has through the first three quarters of this year scored revenues of about $62 million.

Since its launch nearly four years ago, About.com is one of the few Internet firms to become "successful" and is the seventh-most-visited network of sites, with almost 21 million unique users surfing there in September, according to Media Metrix.

"We are a pure stand-alone dot.com," Kurnit said on a conference call open to media and analysts. "About.com has always been able to pay the bill."

The About.com purchase will add $47 million in incremental earnings before taxes, interest and other items during 2001.

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About.com and Primedia overlap in many content areas, such as autos, hobbies and teens, a fact that is sure to please advertisers, who are always seeking to get more "bang" for their buck.

"If successful, this deal will truly transform Primedia into an integrated off-and on-line targeted media company," said analyst Karl Choi, of Merrill Lynch, in a research note. Merrill Lynch also advised Primedia in its purchase of About.com.

First quarter 2001 will be toughest for the combined company, Choi said, but longer term he is confident the Internet will generate significant advertising and sponsorships. About.com will be able to tie together Primedia's diverse assets in business-to-consumer properties while also presenting a huge potential to expand Primedia in the business-to-business area, he said.

graphicThe About.com transaction is one of the first significant purchases clinched by Rogers since joining Primedia in September 1999. Primedia also inked a deal to buy Kagan World Media Inc. on Oct. 10 for an undisclosed amount.

"This is what Tom Rogers was hired to do: make bold, timely moves," Choi said.

Indeed, Rogers, who is credited with breathing life into cable networks CNBC and MSNBC, has inked several deals aimed at awakening the value in Primedia's substantial assets and subscriber rolls. In March, he forecast that the company's revenue from new media properties would double in 2000 to $50 million, and jump to $100 million in 2001.

Investors were encouraged at first -- the stocks value tripled in Rogers' first five months. Since then, Primedia shares have suffered along with that of other media concerns, and today tumbled some 27 percent, or $4.25, to 11, its lowest level in the past 52 weeks.

About's shares rose early before easing this afternoon to $23.81, off 6 cents.

Can their offline and online cultures co-exist?


The deal's success hinges on Primedia's ability to execute. About.com has about 4,000 advertisers but now has access to Primedia's 60,000 advertisers. However, Primedia's 1,600 sales staff will need to become accustomed to different rules for the Internet and for selling online advertising, analysts said.

"Offline it's cost per page, while online is cost per metric," said one analyst who declined to speak on the record. "It's a different revenue model. But you have to get comfortable with it."

graphicThe purchase, expected to close during the first quarter of 2001, will add to Primedia's earning in the first 12 months of 2001, a Primedia spokesman said. About.com shareholders will own about 20 to 22 percent of the combined company, while the public will have about 33 percent.

"The combination creates enormous scale with Primedia's leading offline position, being enhanced by it becoming the seventh-most-trafficked business on the Web overall and the largest news and information site on the Web," About.com's Scott Kurnit said.

Wit Soundview also advised Primedia, while Donaldson, Lufkin & Jenrette advised About.

As of Sept. 30, About (BOUT: Research, Estimates) had $133 million in cash and no debt. The combined company will be called Primedia. Scott Kurnit will remain chief executive of About.com and will report to Primedia's Rogers. Back to top

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