Bauer closes in on BBC Magazines as Future and Burda drop out

BBC Worldwide has entered into protracted negotiations with German publisher Bauer Media Group as the 12-month hunt to find a publishing partner for its BBC Magazines portfolio nears completion.

BBC Magazines and Bauer titles
BBC Magazines and Bauer titles

BBC Magazines, led by managing director Peter Phippen, has received expressions of interest from a range of publishers since it first announced plans to find a publishing partner back in April 2010.

The field soon narrowed when it became apparent BBC Magazines was not looking to individually divest its 34 brands among different suitors, but rather find one main publishing partner to assume control of the bulk of the business.

Among those to take an interest were specialist consumer publisher Future and German giant Burda, both of which are no longer in talks with BBC Magazines.

Earlier this year, Hearst Corporation, parent to the National Magazine Company, also walked away from talks with the BBC Magazines following its decision to buy Lagardère's international portfolio.

Bauer is now understood to be honing the finer details of a contract that will effectively outsource most of the BBC's publishing responsibilities, through a series of licensing agreements.

The revelation comes just days before BBC Worldwide is due to finish its financial year on 31 March.

Previously Media Week revealed that Bauer Media Group's wholly-owned UK subsidiaries, Bauer and H Bauer, had effectively joined forces to provide several ruminations to house the BBC portfolio.

Included in any deal will be the licensing rights for BBC Magazines' cash-cow Radio Times, and international best-seller Top Gear.

The BBC is hoping to finalise a deal in the coming weeks and to be able to make a public announcement by early summer.

However, if a deal with Bauer is not able to be reached, it is understood that financial advisor KPMG could be asked to explore possibilities of a management buyout.

BBC Magazines and Bauer Media Group declined to comment.

Any deal between the two media companies, both top five magazine publishers in the UK, could attract the attention of the competition authorities. A combined operation could potentially command more than 75% of the TV listings market, with H Bauer's TV Choice and Total TV Guide being placed in the same stable as the Radio Times.

The OFT has a duty to refer any deal to the Competition Commission if it believes a relevant merger situation has been created that could result in a "substantial lessening of competition".

Under the Enterprise Act 2002, a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the UK of the business exceeds £70 million, or as a result of the transaction, a 25% share of the market.

In its last financial year ending 31 March 2010, BBC Magazines reported revenue of £168.3m, and a profit lift of 13.6% to £18.4m.

Out of that profit, Radio Times, along with lifestyle and specialist magazines Good Food, Gardener's World and Top Gear, attributed to £16.5m.

Children's magazines accounted for £1.3m profit and joint ventures, including BBC Magazines' ventures in India (with The Times of India) and in Australia (with ACP Magazines), made the company a profit of £0.6m.

Another factor that would be considered by the regulator if a deal is agreed centres on what the definition of "market" should be for the media brands in question – magazines as a whole, by sector or to encompass the wider media landscape?

BBC Magazines instigated its search for a publishing partner after a strategic review of BBC Worldwide's media operations. BBC director general Mark Thompson announced in March 2010 that he was backing "digital rather than in print" moving forward.

He said: "In the future, Worldwide will focus in particular on international, as opposed to UK, business development, on evolution rather than merger and acquisition, and over time will move away from exploitation in physical media like magazines."

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