American Media Inc. is trying to get its balance sheet in shape — without Shape.
The struggling publisher on Wednesday sold the title — and sister magazines Natural Health and Fit Pregnancy — to Meredith Corp. for $60 million in cash, plus future profit-sharing, according to sources.
While AMI’s balance sheet certainly could use the cash, the sale could turn out to be a win-win for CEO David Pecker, sources said.
The future profit-sharing over the next three years could reach as high as $60 million, sources said, which would double the deal’s value to $120 million.
Meredith’ s Shape rival, Fitness magazine, will fold its print edition and combine its subscriber list with Shape beginning with the May issue.
The combination will boost Shape’s circulation rate base to 2.5 million from 1.6 million. The Web sites will continue under their own names.
Meanwhile, Fit Pregnancy and Natural Health will cease their print editions.
“The acquisition of Shape establishes Meredith as the leader in the women’s active lifestyle media category,” said Tom Harty, head of the company’s National Media Group.
Shape, whose readers have a median age of 39 and an average annual income of $89,000, will be a “category killer,” Meredith CEO Steve Lacy predicted in a conference call.
AMI is under financial pressure due to its heavy debt load amid the perils of the newsstands market, where its National Enquirer and other titles derive a major portion of the company’s revenues. Moody’s and Standard & Poor’s earlier this month rated its outlook as “negative.”
Last July former bondholders Avenue Capital, Angelo, Gordon & Co. and Capital Research and Management, which had become reluctant stockholders, saw their equity wiped out in a reorganization.
In September, the company hammered out debt-for-equity swap and restructured some remaining debt.
If AMI can get anywhere near $120 million — considered a long shot for a brand that is estimated to make about $17 million next fiscal year — it could go a long way toward solving Pecker’s chronic debt problems.
One big surprise related to the sale is that David Zinczenko, whose firm Galvanized Media had been consulting with AMI on Men’s Fitness and Shape, will continue to oversee Meredith-owned Shape on a consulting basis.
Meredith also is publishing an Eat This Not That magazine based on the best-selling book Zinczenko co-authored Matt Goulding.
Here’s a breakdown on where some of the media talent will be landing:
l Shape’s Chief Content Officer Elizabeth Goodman Artis will be joining Meredith as Shape editor, sources said.
l Current Fitness Editor Betty Wong is getting bumped, but will stay with Meredith’s digital operations.
l Shape Publisher David Jackson will be replaced by Tim O’Connor, director of corporate group sales at Meredith.
Wall Street seemed to like the Shape news, boosting Meredith shares 1 percent Wednesday, to $53.62.