Citigroup Repeats Prediction Of Take-Out For Time Inc

Time Inc's (NYSE: TIME) likely acquisition by Meredith Corporation (NYSE: MDP) adds $4 a share to its value and makes the company an attractive investment, an analyst said Friday.

Citigroup's Jason B. Bazinet painted a dismal picture of revenue declines for the once-iconic publisher of its namesake magazine as well Life, Sports Illustrated and a stable of lesser lights.

But Bazinet repeated his contention that Time will get acquired by Meredith, even as he cut his target to $26, from $28.

Meredith reportedly walked away from talks to buy Time's magazines just prior to the company's spin out earlier this year from Time Warner Inc.

Meredith liked the company's lifestyle portfolio, but balked at accepting Time, Fortune, Money and Sports Illustrated.

Immediately following the spin-off back in June, Bazinet predicted Meredith would be return with an offer.

But a deal won't make sense until the fourth quarter of 2015, because of tax restrictions related to the spin out, Bazinet said at the time, when he predicted a $28 take-out price.

On Friday, Bazinet maintained a Buy rating on Time but shaved $2 from his target, citing his lower estimate of future earnings before interest, taxes, depreciation and amortization.

Time, which traded recently at about $22.40, will have a "fundamental value" of about $22 next year, based on cash flow calculations, Bazinet said.

But that price ignores Time's excess cash and its "likely acquisition" by Meredith, which taken together, Bazinet thinks add up to $8 per share.

Bazinet expects Time will post a revenue decline of more than 2 percent this year, a 4.5 percent drop in 2015 and a further drop of more than 3 percent in 2016.

Although offering no estimates farther into Time's future, "we're still buyers," Bazinet said.