Memo Pad: Lagardère's Ledger... DVF, Full Throttle...

Rumblings that Hachette Filipacchi Media’s parent, Lagardère, may be ready to deal a hefty stake in some titles to Hearst certainly make sense for Hearst.

TO SELL OR...: The recent rumblings that Hachette Filipacchi Media’s parent, Lagardère, may be ready to deal a hefty stake in some of its titles to Hearst Corp. certainly make sense for Hearst, given it would get access to Elle. But what’s in it for Lagardère? The company’s ledger may hold some clues. According to the French company’s most recent annual report, revenues at Lagardère Active, the media division that houses its magazine, television and radio businesses, fell 18.3 percent in 2009 to 1.73 billion euros, or $2.40 billion. Revenues were down across all media, but the presentation made sure to point out that its magazines saw a “very sharp fall in advertising, more marked internationally than in France.”

“They’re trying to reduce their exposure to advertising-dependent media,” said Société Générale analyst Juliano Hiroshi Torii. He pointed out that the firm has recently pursued sporting-event broadcasting rights as an alternative source of income.

Management at the public company has also been under pressure from investors to tidy up shop by selling minority stakes in nonpublishing businesses, such as jet maker EADS and pay-television-provider Canal Plus, as well as other noncore assets. While it’s doubtful the company considers the worldwide Elle brands noncore, it is worth noting Lagardère Active only derived 13 percent of revenues from North America in 2009 — making those operations, at least, marginal and perhaps indicating why Lagardère might be eager to get Hearst involved in Hachette’s American operations, long known to be a headache for the French parent.

Finally, there’s the possibility that chief executive officer and general partner Arnaud Lagardère is under personal pressure to keep the company’s stock price on the up. Lagardère controls the company even though he owns less than 10 percent of its stock. In a July 5 research note obtained by WWD, a staffer at Paris-based brokerage Kepler Capital Markets observed that the closer the company’s stock price gets to the 23 euro ($29.32 at current exchange) mark, the closer the value of the executive’s pledged equity comes to falling below that of his debt load. The note suggested that if the stock, which closed trading Wednesday at 26.67 euros ($34) a share, heads south, the executive could see pressure from the banks that lent to him to realize Lagardère’s assets and distribute portions of the proceeds through special dividends.

Whatever the case may be, curious observers will want to circle Aug. 26 on their calendars. That’s when Lagardère is due to present its first-half financial results and when it might reveal what the Hearst deal — if there is a deal — is all about.

— Matthew Lynch

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