In a marriage of niche content players in the offline and online worlds, Primedia Inc. has agreed to acquire About Inc. in an all-stock transaction valued at more than $500 million. By acquiring the parent company of popular Web portal About.com, Primedia, the $1.5 billion publisher of New York and Teen magazines, hopes to establish itself as a serious new media player. Meanwhile, About pairs its topical online guides with a vast base of advertisers. Primedia has an ad sales force of 1,600, while About employs fewer than 100 salespeople.
Primedia CEO Tom Rogers, who founded CNBC and co-founded MSNBC during his stint as president of NBC Cable, says Primedia will save nearly $50 million in the first year after completion of the deal, expected in the first quarter of 2001. Most of that savings, Rogers says, is tied to new media investments Primedia no longer will have to make, as well as the ability to integrate About's more sophisticated distributed computing infrastructure.
Rogers and About CEO Scott Kurnit stressed that the two companies are a natural fit for each other. Primedia has well-established magazines and other media properties in some 700 niche markets, while About.com offers more than 700 topic-specific guide sites supported by 10,000 associated experts. The resulting company, to be called Primedia, will remain focused on niche markets and topical content. "It is such a perfect match in terms of About being a parallel in the online world to what we are in the offline world," Rogers says.
Kurnit notes that Primedia gets a rarity in the Internet economy of late 2000: a pure dot-com company whose financial picture has been improving. About's revenue grew about 33% from the second quarter of this year to the third quarter, while its losses were slashed in half, from $6 million to $3 million. Kurnit says About is forecasting profitability during the first quarter of 2001.
Primedia investors didn't respond well to the acquisition, driving the company's stock down 25% Monday, from $15.25, to $11.44. About shares rose slightly, from $23.88, to $24.19. The transaction calls for About shareholders to receive 2.34 shares of Primedia stock for each share of About. Based on Primedia's Monday closing price, the purchase price is about $517 million.