Goodbye, BusinessWeek. Hello, Bloomberg BusinessWeek.
BusinessWeek acquirer Bloomberg L.P. plans to slap its name on the venerable business title as it seeks to bolster its B2B assets with the power of the iconic consumer weekly.
The privately held business information company on Oct. 13 announced that it had agreed to buy the struggling title from The McGraw-Hill Cos.
Bloomberg had widely been considered the frontrunner for the money-losing business newsweekly, in part because it presumably was willing to pay more than other bidders. The company apparently had already carved out space in its office building for BusinessWeek in preparation for an eventual deal.
Terms weren’t disclosed, but observers had reckoned that McGraw-Hill would have a hard time getting much for BusinessWeek, considering it was on track to lose around $70 million this year.
BusinessWeek reported on its Web site that Bloomberg’s cash offer was in the $2 million to $5 million range, plus the assumption of liabilities.
Bloomberg President Daniel Doctoroff apparently said as much when he addressed hundreds of Bloomberg staffers after the deal was announced. Said an insider: “They basically insisted they didn’t pay much for this.”
One industry observer, Reed Phillips, managing partner of media investment bank DeSilva + Phillips, estimated the final price to represent about $45 million to $60 million.
“I think the price paid was more about the McGraw-Hill liabilities Bloomberg was willing to assume than the money Bloomberg would pay,” Phillips said in an email. “In other words, if Bloomberg assumed the subscription liability for yet-to-be-delivered issues that subscribers paid for in advance and severance
costs for BusinessWeek, employees who would lose their jobs after Bloomberg takes ownership, that could amount to as much as $45-60 million.”
When McGraw-Hill put the 80-year-old BusinessWeek on the block in July, observers promptly drew comparisons with TV Guide, another struggling, mass-circulation magazine that was taken over last year essentially in exchange for $9 million in debt.
Like all business titles, BusinessWeek has suffered as its core ad categories like financial and technology have slashed marketing spending in the face of the recession. BusinessWeek’s ad pages tumbled 34 percent to 923 this year through Oct. 12 while the entire business/financial magazine category was down 31 percent, per the Mediaweek Monitor.
In recent weeks, would-be bidders including OpenGate Capital, Mansueto Ventures and Bruce Wasserstein dropped out of the race.
The deal represents a dramatic turnabout for Bloomberg, which has long described itself as growing organically, not by acquisition. In the Oct. 13 meeting with staff, Doctoroff made the case that BusinessWeek would enable Bloomberg to reach a mass audience in print and online and in so doing, gain better access to business leaders.
“Bloomberg wants to be the most influential business news organization,” the insider described Doctoroff as saying. “Right now, we’re not reaching a mass audience. There are people we want to talk to us first. In order to do that, that we need that consumer reach. By adding BusinessWeek, it feeds into it.”
In a statement announcing the deal, Bloomberg chairman Peter Grauer said the acquisition would strengthen the financial information company’s online, TV and mobile products, and that Bloomberg Television would build content around the BusinessWeek brand.
Norman Pearlstine, Bloomberg’s chief content officer, who also attended the meeting, said that the recent success of the British newsweeklies The Economist and The Week in the United States also influenced Bloomberg’s decision to buy BusinessWeek.
“People are looking for serious news,” the insider described Pearstine as saying. “What that said to them is, there’s a niche for serious news.”
Pearlstine, a veteran editor of The Wall Street Journal and Time Inc., will become chairman of BusinessWeek following the deal’s completion. The transaction was expected to close in the fourth quarter of 2009.
Doctoroff also told staffers that BusinessWeek would retain its weekly frequency and that Bloomberg would continue to publish its existing Bloomberg Markets magazine.
What’s not known is if the BusinessWeek and Bloomberg Web sites will be merged or operate separately. Bloomberg execs hoped to move the BusinessWeek staff into their new space by May. But they were vague about how many BusinessWeek staffers, including editor Steve Adler and president Keith Fox, will come over with the sale.