While private equity can seem to do no wrong, there are certainly some case studies of botched deals. One is KKR's backing of Primedia (NYSE: PRM).On paper, it seemed to make sense: consolidate the fragmented world of specialty publications. However, with lots of debt and difficulties with synergies, things just didn't work out.
Now, Primedia is in the process of unwinding its many deals. The latest is the $1.2 billion sale of the Enthusiast Media division. It includes 70 magazines like Soap Opera Digest, Motor Trend and even Snowboarder. There are also 90 web sites.
The buyer is Source Interlink (NASDAQ: SORC), which is backed by billionaire Ron Burkle. He made a fortune in the grocery business because of strong operational skills and buying up assets at deep discounts.
To finance the deal, Burkle is getting loans from Citigroup (NYSE: C).
Interestingly enough, it looks like Source Interlink is trying to pursue the same type of consolidation strategy that Primedia tried.
And, so far, shareholders are a bit concerned. Over the past couple days, the stock price has fallen about 15%.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
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