May 10, 2017 / 7:16 PM / 3 months ago

Time may join ranks of regretful M&A refuseniks

The cover of Time magazine is seen at a news stand at Pennsylvania Station in New York U.S., November 9, 2016.Shannon Stapleton

NEW YORK (Reuters Breakingviews) - The clock is officially ticking for Time. Days after spurning takeover interest, the U.S. publisher of People, Sports Illustrated and other magazines slashed its dividend amid falling revenue and wider losses. Some companies have been wise to go it alone, but many struggle to recoup the deal-imputed value.

Nearly three years ago, Time was spun off by Time Warner with over $1 billion in debt weighing it down. The removal of the media conglomerate's glossy cover made its troubles even more glaring. Advertising and circulation sales keep falling, trends that persisted in the most recent quarter. Unsolicited approaches, including ones from rival Meredith and Seagram heir Edgar Bronfman, offered a welcome lifeline, but Time rejected the entreaties.

By doing so, it joined a scrappy club of targets that have opted for independence. Bigger quarry such as food giant Unilever and paint maker Akzo Nobel are in similar positions. According to an unscientific analysis by Breakingviews of some three dozen companies that have snubbed suitors over the last decade, roughly half of them made the right call.

A prime example is Illumina, a maker of DNA-sequencing equipment. It fended off a $51-a-share offer from Roche in 2012. Five years on, Illumina shares fetch $181 apiece. Similarly, Casey's General Stores is now worth about three times as much as when rival Alimentation Couche Tard unsuccessfully tried to buy it in 2010. And in one of the more storied takeover defenses, Airgas wriggled away from Air Products & Chemicals and landed a much richer sale price from Air Liquide a few years later.

On the other hand, Leap Wireless, Avon Products, CSX, Perrigo and Macerich are among those that failed to clear new valuation bars set by their would-be buyers. Likewise, Time boss Rich Battista has a steep climb ahead to keep from leaving his investors wanting.

After a sharp decline on Wednesday, Time's share price is now 40 percent below the $18 offered by Bronfman late last year. To its credit, the company is cutting costs and aggressively trying to grow its digital operations, evidenced in part by a one-third increase in online advertising revenue last quarter, while expanding in short-form video and ad technology. It'll take a remarkable turnaround, however, for embattled Time to avoid joining the ranks of regretful M&A refuseniks.

Breakingviews

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