Supermarket magnate Ron Burkle lost his bid last year to buy into Knight Ridder Inc., the nation's second-biggest newspaper chain.
This year, Burkle and fellow local billionaire Eli Broad were turned back in their offer for Tribune Co., owner of the Los Angeles Times.
On Monday, Burkle scored on his third try to become a publishing czar when a company he controls agreed to pay $1.2 billion for 76 specialty magazines, related websites and other holdings. The acquisition includes such venerable titles as Motor Trend, Hot Rod and Surfer, all of which were founded in Southern California, as well as some more obscure macho hobbyist magazines including ATV Rider, Four Wheeler and Super Streetbike.
The deal left some analysts questioning whether Burkle's company overpaid. "We find it difficult to see where many opportunities exist" for the magazines and websites, said Donald Trott, a Jeffries & Co. analyst.
Under the deal, Florida-based Source Interlink Cos., one of the nation's largest distributors of magazines, DVDs and music CDs to retailers, will acquire the magazine unit of Primedia Inc. Burkle's investment firm, Yucaipa Cos., which orchestrated a host of grocery mergers and currently holds stakes in such companies as Wild Oats and Pathmark, owns about a third of Source Interlink, making it the largest shareholder.
Source's stock dropped nearly 15% to $5.79 on the news Monday. And analysts were told they would have to wait to learn how the magazine distributor would benefit by becoming the publisher of a wide array of periodicals.
Trott called the sale price "rather lofty" and questioned whether the borrowing costs would exceed the operating profit from Primedia's Enthusiast Media division, which includes 90 websites, more than 65 special events and 400 branded products.
Burkle and his Yucaipa group are entering publishing at a time when the industry is undergoing wrenching changes as readers increasingly turn to the Internet for information. The billionaire, who counts former President Clinton as his friend and sometimes house guest, recently raised eyebrows when he hired former Los Angeles Times Publisher Jeffrey M. Johnson, who was ousted after refusing to make job cutbacks demanded by his Tribune bosses in Chicago.
A Yucaipa spokesman declined to comment on the company's strategy. But Source Interlink Chairman Michael Duckworth called the acquisition "a first step to leverage what we have built by transforming Source into a fully integrated media company with both print and digital content." Duckworth is a Yucaipa partner.
