NEW YORK (The Deal) -- Rupert Murdoch's News Corp. (NWSA) is adding romance novel publisher Harlequin Enterprises to its global publishing portfolio through a C$455 million ($414 million) in deal with Torstar
News Corp. CEO Robert Thomson said that Harlequin would expand the company's reach into new languages and benefit its digital media platform.
Harlequin's bodice rippers generated C$56 million in 2013 Ebitda from C$398 million in sales, with 40% of the top line coming from books published in languages other than English. The Toronto publisher will become part of News Corp.'s HarperCollins, which publishes 99% of its titles in English.
News Corp. split from broadcast and film group 21st Century Fox last summer."One of the benefits of the spin, where News Corp. separated from its parent, is that it has the ability to invest in its growth," said Moody's Investors Service analyst Carl Salas, "whereas a diversified company may not have invested in classic book publishing." Moody's does not rate News Corp.'s debt, but Salas said the deal would be positive from a credit perspective because it diversifies the company's revenue and cash flow. News Corp. is well positioned to buy a publisher such as Harlequin, the analyst noted, because it can eliminate overhead and other expenses. "I'm not sure it would be investing $400 million plus in publishing if it had not been spun off," he said. Wells Fargo Securities analyst Eric Katz estimated that book publishing would grow from 16% of News Corp.'s revenue to 20%, and make up 26% of Ebitda, following the Harlequin buy. "We like the strategic fit, larger international footprint, and [News Corp.]'s move into a business with visibly improving margins," he wrote. Other diversified media groups with publishing businesses are following News Corp.'s example. Time Warner (TWX) plans to spin off Time, and Tribune will break out its newspaper arm. News Corp. and Torstar expect to close the Harlequin deal by the end of the third quarter. Centerview Partners LLC advised News Corp.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV