When the dust had settled, it appeared to many analysts that when Cerberus (the investment company which bought Chrysler from Daimler; the name refers to a mythical three-headed dog which guards the gates of hell) paid around $7.4 billion for the company, Daimler was actually paying (or losing to) Cerberus some $1.6 billion just to take the company off their hands. It was a divorce pay-out which shocked people even in Hollywood!
During this past week, also, a company controlled by the 53-year old man rated the 335th richest person in the world by Forbe's Magazine, Ron Burkle, used his Florida-based Source Interlink Cos., one of the largest distributors of magazines, DVDs and music CDs to retailers, paid $1.2 billion for 76 magazines which had been the "Enthusiast Media" division of Primedia. He thus becomes the third owner of what had been Petersen Publishing, created by Robert E. Petersen in Los Angeles over 50 years ago. 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. Burkle is also well-known as a close friend and fundraiser of Bill and Hillary Clinton. The Clintons would often stay at Burkle's Los Angeles-area mansion when on the west coast, and Burkle never seemed shy about the press coverage their visits afforded him and his company. Burkle now owns MOTOR TREND, HOT ROD, CAR CRAFT, FOUR WHEEL OFF-ROAD (one of my alma maters), SURFER and many, many other well-known and very profitable titles. But his company specializes in delivering media, not actually publishing magazines. Our guess? As we've said many times on this BLOG, traditional printed paper versions of those magazines will soon cease to exist; they'll be online and available on CD/DVD only. (Photo - Ron Burkle. We know what he's happy about, or can only guess).
What do these two buy-outs have in common? Analysts worldwide have quite varying opinions on the prices paid and the outlook for the companies bought. Clearly, Cerberus got a bargain, purchasing not just a car-builder but a true American icon. For decades, the silhouette logo of the venerable "Jeep" has been one of the most-recognized pieces or artwork in the world, right up there along with the "Coca-Cola" logo and silhouette of the classic glass Coke bottle, which is still sold in may nations around the world. And that's just one part of the company Cerberus got at, essentially fire sale prices.
The same can not be said for Burkle's purchase of these magazines. Most analysts say Burkle overpaid a tremendous amount for the Enthusiast Media group, which had been up for sale since February. (Pohot below --- Robert Petersen and his magazines). Here's some background --- As we noted on February 9th in this BLOG:
"PRIMEDIA has purchased a Canadian publishing company called VerticalScope Inc., and their Modified Automotive Group (MAG), including Modified Magazine, Modified Luxury & Exotics Magazine, Modified Mustangs Magazine, and their related event partnerships and websites. Then, the next day, Friday, February 9th, Primedia announces their Board of Directors has "authorized the company to explore the sale" of their Enthusiast Media Segment, which includes more than 75 magazines, 100 websites, 70 events, two television programs, 400 branded products, and such well-known brands as Motor Trend, Automobile, Automotive.com, and other enthusiast pubs such as Equine.com, Power & Motoryacht, Hot Rod, Snowboarder, Stereophile, Surfer, and Wavewatch.com. Why? Because these gal-laden, generally poorly-written books "skew toward a younger demographic", says Primedia's press release on the subject. Also, the sale of the Enthusiast Media Group will be used to "pay down debt" by Primedia, which should make all the employees there feel real good about themselves and their company."
So there is the story as it stands, as of this week.
Chrysler has (again) an American owner; but this is the first time since its inception that Chrysler has been owned by a private firm, not beholding to stockholders. The entire deal rests on Cerberus' ability to negotiate with the United Auto Workers as over $1,200 of the price of each vehicle sold by Chrysler and their various divisions funds UAW contracts which were signed several years ago (and which no one forced Chrysler management to sign). If Cerberus can do what some of the airline companies have done, that is, screw their workers and especially their retirees (the LOS ANGELES TIMES today editorializes that screwing the workers would be better then the company going under ... one has to wonder if a white collar or blue collar employee wrote that), then that is one way to "save" Chrysler. As a very smart person once said, "There is always an easy answer to every problem, and it is usually wrong". We hope the UAW and Cerberus come up with something a bit more original, which does not ruin the lives of even more working Americans.
Cerberus says also that Chrysler will focus much more of their efforts at emerging markets, especially Southeast Asia, Russia and India, where the idea of very basic family transportation for under $3,000 is a hot topic and something which has been promised for those parts of the world for several years by Chrysler, but nothing has as yet come to fruition. This vehicle will almost definitely be built almost entirely of advanced plastics and ceramics, some of which have not yet been developed (especially for internal engine parts). The idea is to make the vehicle inexpensive, lightweight and very strong. Reportedly, much of the monies which Cerberus is using to buy Chrysler is coming from Russian investors.
When it comes to Burkle and his purchase of these magazines, consider that when Robert Petersen sold all his company's titles to a Wall Street firm about 20 years ago, the firm paid around $500 million for the entire company (less Petersen's properties on Sunset Boulevard in Los Angeles; reportedly he was the largest single private investor in traditionally expensive Sunset Blvd. land, with many of those investments the work of F.R. Waingrow, who, after 50 years or smore with Petersen, was very publicly fired by Petersen when certain discrepancies were found in the sales papers Waingrow presented to Petersen for his final approval). Now, just a few years later, Primedia was able to up the cost to over $1 billion. Not too bad. Reportedly, Ron Burkle, Yucaipa's chief executive, pulled the trigger on the purchase only after he had lost out on deals to buy the Los Angeles TIMES, (along with Los Angles land baron and philanthropist Eli Broad) and the Knight-Ridder newspaper chain.
Now, if Ron Burkle wants to be a publisher, he certainly has the successful titles to kick-off his new career. Our bet? No more paper magazines from Burkle after a few more months; e-media only.
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