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Burkle Looks to Shape AMI, perhaps Flex

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When he isn’t corrupting the nation’s youth (the 27 year-old mayor of Pittsburgh) or jetting around with Bill Clinton on “Ron Air,” supermarket billionaire Ron Burkle is trying to snag up magazine distributors. The latest target in his crosshairs is American Media Inc (AMI), the struggling magazine publisher of Star, National Enquirer and a whole bunch of magazines featuring greased up dudes (Flex, Muscle & Fitness, Men’s Fitness, Pec Fancy).
It is unclear how much AMI is taking it on the chin, as it keeps delaying its 2006 financial results, after a myriad of accounting issues (involving the booking of magazine stand and office subscription revenue among other things – basically, blame the copy of Star in your dentist’s office) resulted in a protracted effort to restate financials starting early last year.
Despite internal affairs, title shutdowns, HQ relocations and Bonnie Fuller’s occupational rollercoaster, AMI’s real problems started when the paper tabloid was displaced by the glossy celebrity weekly, resulting in a huge (and expensive) strategic push for AMI to turn its tabloids into glossy publications and re-brand several of its core titles, not to mention a complete shift in revenue concentration from stand to sub revenue that hasn’t fully ramped up the way AMI expected (the losses in stand revenue haven’t yet been recouped by the gains in sub revenue for many titles). AMI is still in the middle of this push, but kind of in a jam now that the celebrity weekly market is over-saturated, and not experiencing the same rapid growth it saw over the last few years.
Now, T.H. Lee and Evercore want to salvage their $400+mm AMI investment made in April 2003 at almost 10x LTM EBITDA (does anyone know how much (or if) T.H. Lee or Evercore has written down its AMI investment?).
Burkle is reportedly attempting to merge AMI with Source Interlink Cos, now the number 1 domestic distributor of magazines after an aggressive acquisition strategy that included gobbling up Anderson News and Levy Brothers. Burkle owns 34% of Source through his investment company, Yucaipa Cos.
The NY Post broke this story, although no word on whether it tried to extort Burkle for coverage on the matter, like the alleged $220k Page Six tried to get from Burkle for a nice write-up.