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January 15, 2018

Publishing News

Meredith Gets Antitrust Clearance for Time Inc. Buy; Will Issue Up to $1.4B in Notes
Meredith issued a release announcing that "early termination of the waiting period has been granted under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 applicable to its acquisition of Time Inc. As a result, Meredith plans to complete the transaction--first announced on Nov. 26, 2017--within the next 30 days, subject to satisfaction of the other terms and conditions of the tender offer. Meredith also announced today that it intends to offer, subject to market and other customary conditions, up to $1.4B in aggregate principal of new senior unsecured 8-year notes. Meredith intends to use the net proceeds of the proposed offering to fund a portion of its proposed acquisition of Time Inc.; to repay existing Meredith and Time Inc. indebtedness and credit facilities; and pay other fees and expenses related to Meredith's acquisition of Time Inc. and the related refinancing. The Notes will be offered in the U.S. to qualified institutional buyers that are qualified purchasers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and outside the U.S. to non-U.S. persons pursuant to Regulation S under the Securities Act. The Notes will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the U.S. except pursuant to an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. This press release does not constitute an offer to sell any security and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer or sale would be unlawful. On Jan. 4, 2018, Meredith launched the marketing of its proposed $2.15B secured credit facilities to fund the balance of its proposed acquisition of Time Inc. These credit facilities are contemplated to be comprised of a $1.8B 7-year Term Loan B facility and a $350M 5-year revolving credit facility."

Time Inc. Plans New Bonuses for Execs Ahead of Acquisition
Axios: "Time Inc. has decided to pay out $2.4M in cash bonuses to top executives, in what appears to be in direct opposition to previously-approved compensation plans. The bonuses are sure to stick in the craw of rank-and-file who are worried about losing their jobs when Time Inc. is acquired later this year by Meredith Corp., at a stock price below where shares were trading at this time last year.Time Inc. said in an April 2017 regulatory filing that 'none of the [senior executives] is eligible for any cash payment or benefit solely upon the occurrence of a change in control.' But such cash payments are exactly what the company seems to have disclosed in a filing yesterday. Six top executives, including outgoing CEO Rich Battista, will receive $325,000 checks shortly after the acquisition closes. Other outlays include $150,000 for chairman John Fahey, who only has been in the position for eight months. Moreover, the bonuses are on top of previously-approved compensation plans that were designed to keep executives around while Time Inc. and Meredith work to finalize their merger. The new filing does reference that the money will come out of a "previously established retention bonus pool," but such a pool does not appear to have been mentioned in any prior Time Inc. filings. A Time Inc. spokeswoman declined comment."

Hearst to Lay Off 145 Rodale Staff
NY Post reports that 145 employees will be laid off at Rodale. "Hearst, which paid a bit less than $220M for the privately held publisher, closed the deal on Jan. 2, but the pink slips did not begin flying until this week. All ­but one of those to be laid off will work through March 10, according to a filing with state regulators. Hearst assumed the pension and severance payments and is offering two weeks pay for each year worked--up to a maximum of 52 weeks, sources said. The Rodale name, which has been around since the founding by J.I. Rodale in 1930 and passed through three generations, will no longer be used by Hearst and will shortly disappear."

Condé Nast Sets Rules to Protect Models From Harassment
NY Times: "Prompted by the sexual harassment outcry that has enveloped fashion and other industries, Condé Nast said it began working in late October on a code of conduct that will go into effect this month.Separately, in response to allegations of sexual harassment and abuse of power from numerous male models against the photographers Bruce Weber and Mario Testino, the media company said in a statement on Friday that it would stop working with the two men, at least for now..." The Cut reports that several big fashion brands have also announced that they will stop working with the two photographers.

Facebook's Shift Away from Publishers' Content Called Good for Media, Long Term
As reported in NY Times last week (see Friday's MBR Daily), Facebook plans to begin prioritizing content from friends on the platform and downgrading posts from news outlets, publications and brands. Digiday's Lucia Moses summarizes likely impacts: "Justin Smith, CEO of Bloomberg Media, has warned publishers of platform dependency for the past two years. The move, in his view, is fundamentally an 'admission of vulnerability' by Facebook. While many will feel short-term pain, the lasting impact of Facebook occupying a shrunken role in media is for a healthier industry that rewards loyalty, strong brands and sound business models. 'This move can be interpreted as one of the first cracks in the facade of the duopoly,' he said. 'This development is very good for all of media in the long run.' In the short term, of course, there is pain. But that pain will not be evenly distributed. 'This one’s really going to capture the attention of publishers in the sense of, you can’t build a business around the Facebook algorithm because you don’t know when it’s going to change,' said David Chavern, president/CEO of the News Media Alliance, a trade group representing newspapers from local outlets all the way up to Dow Jones and The New York Times. For publishers that have become too reliant on a business model that relied on amassing big audiences with viral but undifferentiated content, this newest news feed change is a reckoning. A lot of publishers have audience scale but little else to differentiate themselves. What’s more, these publishers weren’t making much money off that scale--it was, in many cases, empty calories. 'Traffic chasers’ fall from grace will be severely expedited,' said Rich Antoniello, CEO of Complex Networks. 'If they were going to be out of business in three years, now it will be 12 months.' Said another publisher CEO: 'Anyone who listened to Facebook and optimized to reach in the feed is in tough shape.' Forward-thinking publishers have been moving toward focusing on content that engenders loyalty and hopefully subscription revenue. They’re also pushing to diversify their traffic sources so they’re less dependent on Facebook, still the second biggest referrer of traffic just after Google. There are still many unanswered questions about what the changes will mean for different types of publishers and content, but it’s safe to say this diversification shift will accelerate as publishers move from shock and dismay to asking what tactical things they can do to insulate themselves from an increasingly newsless news feed. Many have adopted Facebook Groups as a way to deepen their connections with readers in smaller numbers but with stronger engagement, for example. 'It’s time for us as an industry to look more closely at the other ways to grow audiences,' said Matt Karolian, who heads social media for Boston Globe Media. Even hard news, which many predict will take a hit in the new news feed because users don’t typically comment or share it, can still find airtime on Facebook if it’s framed in terms of how it impacts people’s lives, which can then prompt people to share or comment on it, he argues. 'Publishers will take all the energies and resource into a low-return strategy and put those into different areas,' especially those driving direct relationships, said Smith. In the coming weeks, audience development pros will be closely monitoring their traffic data to see if and how Facebook’s news feed change impacts them before reacting. Some will doubtless continue the Facebook tap dance to see if they can alter their strategy to give Facebook what it wants. Jason Stein, CEO of Cycle, predicts 'a drawn-out period of experimentation.' Still, there’s a growing sense that publishers are wanting out... many publishers...still post to Facebook, but have given up waiting for Facebook to become a significant revenue driver. 'If it’s a piece of the marketing puzzle, you model that very differently,' said Jason Kint, CEO of publisher trade group Digital Content Next. 'You look at the costs and make sure you can justify it as a marketing expense.' Facebook is a regulator of the news business without accountability, Chavern said. 'It is a watershed moment in terms of publishers being much more cynical about their ability to build a business on Facebook.' And for Facebook, the test will be whether replacing news with more baby photos and status updates will help its business, which is predicated on obsessive user engagement. 'The loser here is Facebook,' Bloomberg’s Smith said. 'I can’t imagine that taking off all this quality news content and replacing it with personal connections experiences will result in deeper engagement.'" Separate Digiday piece reports on likely winners and losers--with big publishers being among the former.
Digiday (good in long term)
Digiday (winners and losers)


Retail News

Walmart Reportedly Cutting 1K Corporate Jobs; Replacing Store Co-Managers With Assistant Managers
CNBC: "A Walmart store is seen on January 16, 2016 in Chinatown, Los Angeles, one of seven Walmart stores in Southern California and 269 stores across the globe that will close down due to company restructuring. Walmart plans to cut 1,000 corporate jobs 7:31 PM ET Fri, 12 Jan 2018 | 00:13Walmart is planning to cut over 1,000 corporate jobs, the Wall Street Journal reported Friday citing sources.The layoffs, expected to be completed by Jan. 31, 2019, will focus largely on employees in its corporate headquarters, the report said... Meantime, Walmart is also shaking up its management workforce, according to a report by Bloomberg. The report said the retailer is planning to remove about 3,500 store co-managers and adding 1,700 assistant store managers. The latter is a slightly lower-paid role.Walmart, like many retailers, is attempting to reorient itself to a new retail landscape in which store footprints are out of sync of shoppers. It is also battling e-commerce giant Amazon, whose advanced investment in technology helps it leapfrog traditional stores' profit margins... A Walmart spokesperson said, 'As we've previously stated, we've been looking at our structure for some time as we explore ways to operate more effectively. We continue to do that but are not going to comment on rumors and speculation.'"

Kroger Among Those Interested in Acquiring Boxed
PG: "Boxed, a bulk-shopping ecommerce retailer, may soon be acquired by a brick-and-mortar grocer, with a number of 'major retailers' showing interest, including The Kroger Co., Forbes has reported. Founded by a group of tech pioneers in 2013, Boxed has received 'acquisition interest' from Kroger and other retailers--possibly including club-store chain Costco, mass-merchandiser Target and hard-discounter Aldi--people close to the matter told the business news outlet. If multiple companies make formal bids for the New York-based startup, the company could move through a quick auction. While initial offers likely range from $325M to $500M, some of the companies interested in Boxed have yet to make a formal offer as of press time, and Boxed could still walk away from any deal, Forbes noted. Boxed last raised $470M in 2016 and, should it remain independent, plans to launch another round of funding.While giants such as Amazon and Walmart have been the big newsmakers on the grocery technology front in the past year, Boxed has grabbed its share of attention, adding a number of unique innovations in recent months. In December, the ecommerce retailer added augmented reality, a chatbot and group ordering to its website to more conveniently plan ahead and better build, make, track and stock orders, all through smartphones..."

BJ's Recruits Sam's Club Members
PG: "n a bid to capitalize on Walmart’s sudden decision to close 63 Sam’s Clubs, BJ’s Wholesale Club is appealing to Sam’s Club members to sign up with the rival warehouse club retailer at a nearby location or online and begin shopping--and saving--at once. According to Westborough, Mass.-based BJ’s, new members can also download the BJ's app, which includes Add-to-Card coupons for automatic savings.Further, in the wake of the announced Sam’s Club closings, BJ’s said it 'has received numerous inquiries from Sam's Club employees,' and directed those interested in applying for jobs to visit its website or a nearby club.Wholly owned by affiliates of Leonard Green & Partners, CVC Capital Partners and its management team, BJ’s operates 215 warehouse clubs and 133 BJ’s Gas locations in 16 states."

Store Closures Reflect Retailers' Heavier Focus on Productivity
SN: "Walmart’s announcement that it was closing 63 Sam’s Club stores in markets around the country is a sign of the times, when store productivity is becoming increasingly more important than brick-and-mortar square footage, analysts said. The closures come as Kroger also prepares to shutter six locations in multiple markets, and as several chains, including Kroger and Walmart, cut back on new-store development. Such closures might become more commonplace in the year ahead, as retailers rethink the value of their brick-and-mortar locations in an era of increasing e-commerce and rising real estate costs, said Burt Flickinger, managing director at New York-based Strategic Resource Group. Food retailers are likely to take a page from Home Depot’s strategy of the last 10 years and focus on driving more sales from existing stores, and exiting locations where costs or operating conditions become onerous and opening fewer new stores, he said. Flickinger said the current food retailing landscape includes about 150% of the square footage needed to meet demand. 'You will see...fewer stores, higher volume and more productivity, and more profitability per store,' he said. Often,food retailers are facing cost increases from landlords that are forcing the retailers’ decisions, he said. 'Many times, it is cheaper to close a money-losing store than try to turn it around'"...

Supreme Court to Consider E-Commerce Sales Tax Case
MNB cites a Wall St. Journal report that the Supreme Court 'has agreed to take a case which will finally determine whether individual states can require e-commerce companies to collect sales taxes, even if those companies do not have a physical presence in that state. The story notes that the case being heard is an appeal by South Dakota, which 'has been pushing a test case with the goal of overturning a high-court precedent that limits states’ sales tax collections. If South Dakota prevails, other states would likely begin taxing online and catalog sales from beyond their borders, ending an era in which consumers could save taxes by shopping inside their homes instead of in their local stores.' In fact, 35 other states support the South Dakota appeal, saying that the way the laws exist now is costing them billions of dollars in tax revenue.While previously the Supreme Court has made sales tax collection contingent on e-tailers having a physical presence in the state, it also recognized that, as Justice Anthony Kennedy once wrote, 'changes in technology and consumer sophistication' meant that the court probably should revisit its ruling in the future.The defendants in the South Dakota case include Wayfair, Overstock, and Newegg, which have argued that the question is best left to Congress, not the judiciary. Amazon has supported federal legislation to resolve the issue, but these days Amazon has operations in so many states that it makes the court ruling almost irrelevant.

How Retailers, Restaurants Can Protect Themselves from ICE Raids
SN: "Immigration and Customs Enforcement agents swept into 7-Eleven convenience stores across the country on Wednesday. They demanded documents and paperwork from managers at 98 stores and arrested 21 employees on suspicion of being in the country illegally... 'If I were the government, I would think about where are the low paying jobs that Americans don’t want to do that we may have undocumented immigrants working there,' said Richard Rawson, a business immigration attorney with Davis Wright Tremaine LLP in Seattle. A 2014 Pew Research study estimated that 1.1M undocumented immigrants work in U.S. restaurants.To protect yourself, operators should have all their I-9 paperwork in order, said Rawson. These forms are used to verify workers eligibility to work in the country. If a business gets inspected by ICE, sloppy or incorrect paperwork can lead to fines even if all employees are legally allowed to work in the country, he said.Rawson suggests going a step further to verify workers status by using E-Verify, an online system from the U.S. Citizenship and Immigration service that allows businesses to determine the eligibility of potential employees. 'If you’re the last person on your block who hasn’t signed up for E-Verify all the undocumented workers are going to go to your restaurant,' warned Rawson. If a restaurant is visited by ICE, operators don’t need to let agents into non-public parts of the establishment unless they have a warrant, he said. More often, agents have a notice of inspection and operators have three days to produce documents. 'Don’t do anything more than you’re required to,” he said. 'Call your attorney right away, ask for identification. Make sure you’re not consenting on a voluntary basis'"...


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