Could a merger bring mercy to Bauer Media?

Does the departure of yet another CEO of the German-owned Bauer Media Group open up an option for it and its chief rival, Seven West Media’s struggling Pacific Magazines?

Paul Dykzeul, Bauer’s fourth CEO since 2012, announced his retirement yesterday after two years in the job. He replaced Nick Chan who abruptly departed the business in 2017. Executive churn has plagued the company since the German magazine giant bought the once-great ACP Magazines in 2012.

Things haven’t been so peachy in other levels of the company either. In his two years in the top job, Dykzeul oversaw the closure of titles including Cosmopolitan Australia, as well as the merging of teams. The teams from Harper’s Bazaar and Elle were combined, then staff for six “Homes” titles were also consolidated into one team. 

So, could a merger be a solution? Bauer is facing such an impossible situation, it would almost be a mercy killing. There’s no worry about media diversity here; the magazine business has been overtaken by Facebook, Twitter, Instagram and WhatsApp and Snapchat anyway. In some ways allowing a merger would show a bit of foresight on the part of the owners and the new media and communications undertaker Paul Fletcher.

Bauer is a privately-owned publisher based in Hamburg (with significant interest in Britain). Merging with an externally-owned rival doesn’t seem to be in the company’s corporate DNA, but takeovers do. Perhaps Stokes and the Seven West board might take a little punt and flick New Idea, Better Homes and Gardens and other titles to Bauer?

Because Bauer is privately-owned, details of the collapse in the value of its local arm are hard to come by. We know the German parent paid $550 million for the ACP Magazines titles that were owned by the old Nine (when it was struggling to survive while its UK hedge fund owners were trying to stop the rot). But a quick look at the experience of Pacific can give us a good idea.

In 2012 (when Bauer bought ACP Magazines), Pacific reported earnings before interest and tax of $39.8 million on revenues of $287.2 million (for the 2011-12 financial year). In 2017-18 Pacific had EBIT of $9.6 million, up from $3.5 million in 2016-17 and all due to more than $32 million in cost cuts. That was on revenue of $139.5 million, down 17% from the previous year. From 2011-12 to 2017-18 revenue more than halved and EBIT plunged 76%.

There is no reason to think Bauer’s experience is much different, and the number of magazine closures and staff cuts in those seven years seem to confirm the sorry story. If Seven West can have a newspaper monopoly in Perth with this week’s buyout of News Corp’s 50.1% controlling stake in Community Newspapers, plus own Channel 7, there should no bar to Bauer buying Pacific.

Generally speaking, magazines are on their last legs, brought down by the rise of the internet. Dykzeul, though, has been bullish in interviews about the state of the business during his time at the top. Celebrity magazines have been struggling — not least of all while battling the Rebel Wilson defamation case against Bauer’s Woman’s Day — but Dykzeul has pointed to titles in the homes and lifestyle genre as doing well.

Brendon Hill, who has been managing director of the NZ branch of the company, will now replace Dykzeul as CEO. He’s got quite the task ahead of him.