Source Interlink to Buy Primedia Titles

Source Interlink(SORC Quote) agreed to pay $1.2 billion for Primedia's (PRM Quote) portfolio of enthusiast magazines.

The all-cash deal -- which is valued at nearly twice Primedia's current market capitalization -- includes more than 70 magazine titles and 90 Web sites.

Primedia had been seeking to sell its special-interest magazines, which include Motor Trend, Soap Opera Digest and Arabian Horse World, in order to focus on its Consumer Source business. The consumer business distributes free consumer publications such as Apartment Guide and Auto Guide.

For Source Interlink, a provider of marketing and entertainment products, the deal is expected to boost its revenue to roughly $2.4 billion on an annualized basis. The company, whose market cap stands at about $355 million, had revenue of $1.9 billion for the fiscal year ended Jan. 31.

"Our review of strategic alternatives is complete and our direction is clear," said Source Interlink Chairman Michael Duckworth in a statement. "Over the last several years Source has driven the consolidation of a fragmented and inefficient channel for the distribution and merchandising of home entertainment content at retail and the newsstand. This acquisition is a first step to leverage what we have built by transforming Source into a fully integrated media company with both print and digital content."

Shares of Source Interlink were climbing in premarket trading. Primedia shares were surging 61 cents, or 25%, to $3.10.