NEW YORK — Bertelsmann agreed on Tuesday to sell the bulk of its troubled Gruner+Jahr magazine unit to publishing powerhouse Meredith Corp. for $350 million — after insisting for years that the mags weren’t for sale.
Move reps the German media giant’s latest retreat from the U.S. market after entrusting BMG Entertainment to a venture with Sony.
Magazines include Child, Family Circle, Fitness and Parents — well-known names, but not leaders in their markets. All were tainted by a circulation scandal that emerged during an ugly legal battle between G+J and Rosie O’Donnell over her failed Rosie magazine.
Gruner+Jahr fired the head of its U.S. biz, Dan Brewster, who later sued, accusing G+J of making him a scapegoat.
“We believe we have just the right skills needed to restore their luster,” said Meredith chairman-CEO William Kerr during a conference call, citing the Des Moines, Iowa-based company’s reputation, massive customer database, marketing skill and newsstand clout.
Gruner+Jahr’s circulation woes knocked down the price of the magazines, giving Meredith a bargain as well as a perfect fit for its own titles.
In response, the stock surged 5.54% to $50.28 Tuesday.
Meredith owns 20 magazines, including Better Homes & Gardens, Midwest Living, Traditional Home and American Baby.
Sale is expected to close by the end of June.
Gruner+Jahr is shopping its two other U.S. magazines, Inc. and Fast Company, separately, although current pact allows it to sell the business titles to Meredith by June 30. If that happens, Kerr said, Meredith would turn around and unload them in a private sale or auction.
Kerr said the deal will give Meredith the biggest reach of any magazine group, make it the second-largest U.S. publisher with circulation of about 30 million and boost its profile with younger women.
Based in Hamburg, Germany, G+J publishes about 120 titles worldwide, including Stern, Brigitte and National Geographic in Germany.
Have to be choosy
Gruner+Jahr CEO Bernd Kundrun said the company is expanding and can’t afford to hold on to assets that are unlikely to achieve a dominant market position or meet profit targets.
G+J will continue to own Brown Printing Co., the fourth largest printer of magazines and catalogs in the U.S.
In the U.S., parent Bertelsmann still owns giant book publisher Random House. That deal was engineered by former Bertelsmann CEO Thomas Middelhoff. Enamored of the U.S., Middelhoff shuttled frequently between Gotham and Germany. He ran afoul of Bertelsmann’s traditional family owners over his aggressive pursuit of Internet assets and of an IPO.