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NEW YORK, May 14 (Reuters) - Magazine publisher Primedia Inc. PRM.N said on Monday it will sell its Enthusiast Media division, which includes publications such as Motor Trend, Soap Opera Digest and Surfer, for about $1.2 billion in cash to Source Interlink Cos. SORC.O.
The deal marks a major step in Kohlberg Kravis Roberts & Co.’s long history with Primedia, which it formed in 1989. Under KKR’s ownership, Primedia has undergone many ups and downs, including a public listing in 1995 and a bet on the Internet boom that later weighed heavily on the company. Its stock is down 89 percent since March 2000.
The deal is also a significant move for grocery magnate Ron Burkle. Burkle’s private equity firm Yucaipa Companies owns 34 percent of Source Interlink, according to Reuters data. The Primedia purchase gives Burkle a big stake in the media world, an area that he is reportedly focusing on. Burkle earned billions of dollars buying and turning around grocery stores.
News of the Primedia deal sent shares of Source Interlink down 13.4 percent to $5.89. Primedia shares rose more than 13 percent to $2.83.
The Enthusiast unit, which Primedia said in February it would consider selling, includes more than 70 magazine titles and 90 web sites. It leaves Primedia with its Consumer Source business, which publishes free consumer guides.
The move comes after Primedia agreed to sell its hunting and fishing magazines to private-equity firm InterMedia Partners for $170 million in cash in December.
Primedia expects $1.15 billion in net proceeds and will be debt-free after the sale.
Private equity firms Elevation Partners, Quadrangle Group and Veronis Suhler Stevenson were among the private equity firms interested in Enthusiast Media, sources previously told Reuters.
Bonita Springs, Florida-based Source Interlink said it expects the all-cash deal to add to adjusted earnings per share excluding one time costs.
Source Interlink manages retail checkout areas for more than 1,000 retail chains and makes in-store displays. It also manages the delivery of magazines and other entertainment products such as DVDs to retailers and consumers.
The deal is expected to close in the third quarter. Source Interlink said Enthusiast Media will operate as a division and will be headed by Steve Parr, who currently heads the group at Primedia.
Source Interlink lined up financing from Citigroup Global Markets Inc.
Primedia said that certain stockholders affiliated with KKR, which owns 61 percent of its shares, unanimously agreed to the deal.
Private equity firms buy controlling stakes in companies, restructure the businesses, and typically sell them two to four years later. They usually borrow two-thirds of the money to make their purchases.
(Additional reporting by Esha Dey in Bangalore)
((Editing by Phil Berlowitz; email email@example.com; +1 646-223-6152)) Keywords: SOURCEINTERLINK BUY/PRIMEDIA
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