Sorry, Jeff, Time Inc's Only Worth $3.5 Billion*

Jeff Bewkes is in the process of spinning off everything Time Warner owns except for video programming (movies and TV).  Time Inc, it is said, might be next.

How much is Time Inc worth?

Not much, says Doug McIntyre at 24/7 Wall Street.

Specifically, Doug thinks it’s worth about $2.5  $3.5 billion:

Assuming some pick-up in advertising revenue in the last quarter of the year, the company will probably have 2009 revenue of $3.5 billion and operating income of $250 million…

The only public company that is a reasonable proxy for Time, Inc. is Meredith (MDP), which has a market capitalisation of $1.3 billion and $325 million in long term debt. That leaves its enterprise value at about $900 million $1.6 billion. Meredith has annual revenue of about $1.5 billion, a little over 80% of that from magazines and the rest from broadcast. The margins on the broadcast business are modest. Publishing operating margins are 16%.

Meredith trades for .6x 1X revenue of market cap less plus long-term debt. If this multiple is applied to Time, Inc. its enterprise value would be $2.3 $3.5 billion.   Read Doug’s full note here >

Ouch.  Well, it’s still worth a lot more than the New York Times (NYT).

(And we do think some of Time Inc’s magazine titles will hold their value.  Time itself is toast, of course.  Fortune will probably be OK for a while.  Sports Illustrated will be fine.  People will be fine.  InStyle will probably be fine.  If/when the economy comes back, the solid titles should see a nice boost in ads.  So Jeff B might want to wait a couple of years before jettisoning the division.)

* As our sharp readers quickly noted, Doug miscalculated Meredith’s enterprise value, and we boneheadedly reprinted his calculation.  Corrected now, thanks.

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