Last-minute entrant Bloomberg L.P. has won the bidding for BusinessWeek, agreeing to acquire the venerable business magazine, BusinessWeek.com and other assets from McGraw-Hill (NYSE: MHP) for an undisclosed amount. BW puts the deal in the “$2 million to $5 million range” plus liabilities, including potential severance payments — not the $1 some joked about but the moral equivalent. Norman Pearlstine, the Time Inc. and Wall Street Journal vet who joined Bloomberg last year as chief content officer, will become chairman of BusinessWeek. Plans call for the deal to close quickly, with Dec. 1 as the target. (The full text of the Bloomberg and McGraw-Hill press releases is below.)
With the move, Bloomberg takes on BusinessWeek’s faltering financial situation, plummeting ad sales and all — and gains its resources, products, standing and valuable brand. Bloomberg’s execs expect to strengthen Bloomberg Television, using that brand and the magazine’s “world-class” journalists, and the company’s web presence; Bloomberg Chairman Peter Grauer said “the BusinessWeek.com and the Bloomberg.com web sites will have more unique visitors than any non-portal business and financial site.” (Rafat’s pre-sale take on the digital value is here.) According to BW, the sites have 20 million-plus uniques and combines revenues of $60 million.
The notion that Bloomberg will replace the BusinessWeek staff with its own has been a recurring theme since the company founded by New York Mayor Michael Bloomberg decided to make a run for what would be its first acquisition. But Daniel L. Doctoroff, president of Bloomberg LP, told BW: “We are not buying BusinessWeekto gut it. We are buying it to build it.” Pearlstine will be the liaison between the two staffs, with a BW publisher and editor-in-chief reporting to him. Eventually, the “Bloomberg” name will be added to the masthead.
On the surface, it may look like McGraw-Hill opted for a buyer from journalism over ZelnickMedia, which had some involvement from Thomson Reuters (NSDQ: TRIN) but is still a private equity firm. But it more likely came down to valuations — and the amount of liability a bidder was willing to assume. I haven’t heard a specific number on liability but was told to think of it in the “tens of millions.” (An earlier report showed more than $30 million in liabilities at the end of April.) But it’s hard to discount the importance to McGraw-Hill of appearing to do everything it can to ensure that the magazine founded in 1929 continues as a journalism enterprise.
BW President Keith Fox told the staff in a hastily called late-afternoon meeting tweeted by Executive Editor John Byrne that the company met with 25 prospective buyers, handled 420 due diligence requests and Bloomberg was the best possible buyer. He also said there would be no layoffs between now and the close, small solace since that may only be six weeks or so. According to details reported by the NYT during the sale process, BW said it had identified about 20 percent of its 421-person staff to be cut in 2009.
Under McGraw-Hill, BusinessWeek has been bleeding money. The magazine lost $43 million in 2008 — $17 million plus $26 million in overhead and rent to McGraw-Hill, according to the sale-process memo, and is on track to lose $41 million this year. That number could be skewed by severance charges.
BLOOMBERG AGREES TO ACQUIRE BUSINESSWEEK
Combination Will Create the Definitive Multimedia Business News Source
New York, October 13 – Bloomberg L.P., the leading provider of news and information for financial professionals, has agreed to purchase BusinessWeek, publisher of the world