Time Inc. Shares Are Surging Today on This Reported Buyout Rejection

By Markets Fool.com

Image source: Time Inc.

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What happened

Shares of Time Inc. (NYSE: TIME) are up more than 17% as of noon EST Monday, following reports that the company has rejected a buyout bid that valued the company at a 30% premium.

So what

The New York Post reported today that Time Inc., which publishes popular magazines like Time, Sports Illustrated, People, and Fortune, has reportedly rejected a buyout offer from billionaire investor Edgar Bronfman Jr. The offer was reportedly for $18 per share, which would have been an impressive 30% increase from where shares started this morning, valuing the company at nearly $1.8 billion.

Bronfman was seeking to team up with Access Industries to buy the publisher. Bronfman is the former CEO at Warner Music Group (WMG), a subsidiary owned by Time Warner (which in 2013 spun off Time Inc. into the company it is today). Access Industries acquired WMG in 2011, so this deal would have made for an interesting reunion.

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Now what

This nearly 20% jump is a welcome surprise for Time Inc. investors, but shares are still trading below where they were in July, and are down about 33% over the last two years. Time Inc. has struggled in the publishing industry's transition from print to digital media. While Time Inc. does seem to be trying to pivot to new models, the majority of its revenue is still from print -- and that revenue is declining.

As for earnings, the company posted a loss of $1.15 per share in the recent third quarter. Additionally, the company has an increasingly heavy debt load, due to recent acquisitions made to gain traction in the digital space -- acquisitions that have helped to raise digital advertising revenue, but not enough yet to turn the tide of decreasing revenue from print advertising. Perhaps investors are praising this deal's rejection because they believe it means that an even better deal will be reached later -- but it's hard to look at this company as an exciting bet operating on its own.

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