American Media May Sell Five Magazines, Hires Banks

By Cecile Daurat
      June 14 (Bloomberg) -- American Media Inc., publisher of the Star gossip magazine, said it will explore the sale of five publications including Muscle & Fitness and Country Weekly to focus on celebrity weeklies and active lifestyle publications.

      American Media hired J.P. Morgan Chase & Co. and Bear Stearns Cos. to advise on the sale, the Boca Raton, Florida-based company today said in a statement. The five titles up for sale, also including Flex, Muscle & Fitness Hers and Mira!, generated about $84 million in revenue and $29.6 million in operating income in the year ended March 31.

      The sale would allow the company to concentrate on its 11 other titles, including National Enquirer and magazines including Shape and Men's Fitness. American Media, which is owned by Thomas H. Lee Partners LP and Evercore Partners, said in a Feb. 15 filing that it planned to restate its fiscal 2006 earnings.

      "They have to streamline their operations and they have financial issues," said Richard Dorfman, managing director of Richard Alan Inc., a New York-based investment company focused on the media industry. "You have a motivated seller and enough potential buyers, both strategic and financial, who will do a deal."

      American Media will take a charge of between $134 million and $160 million in the fourth quarter ended March 31 to write down the value of titles including The National Enquirer and Star, the company said today in a separate filing with the U.S. Securities and Exchange Commission.

      The company will perform an evaluation of goodwill impairment on the rest of fiscal 2006 once it completes the restatement of its earnings, it also said.

Agreement Soon

     The company is hoping to reach an agreement in September or October, Chief Financial Officer Carlos Abaunza said in an interview.

     The sale may fetch as much as 13 times the magazines' combined operating income, or at least $300 million, the Wall Street Journal reported today.

     American Media is jointly owned by Thomas H. Lee, a Boston-based buyout firm, and Evercore, a New York-based financial advisory and private equity firm.