Stewart adds dash of Emeril
EmptyMartha Stewart Living Omnimedia has cooked up a $50 million-plus deal to acquire the content assets of celebrity chef Emeril Lagasse in a move that will further diversify the company's business beyond its core Martha brand.
The acquisition also is expected to help Lagasse expand his worldwide TV reach, with MSLO saying there already are talks about new TV opportunities in the U.S. and that it will make international TV syndication a priority.
"That's obviously something we will move on pretty quickly," president and CEO Susan Lyne told analysts Tuesday. "There are other television opportunities as well." While she declined to specify them, she added that expanding the licensing business of Emeril is another key growth opportunity.
The New York-based media and merchandising firm said Tuesday that it expects the Emeril cookbooks, TV shows and kitchen products to contribute to its financials right from the close of the deal, which is expected during the second quarter. MSLO projected $8 million in earnings before interest, taxes, depreciation and amortization from the Emeril deal in the first year and said the Emeril assets generated $14 million in revenue in 2007.
The company founded by domestic doyenne Martha Stewart said it has agreed to pay $45 million in cash and $5 million in stock once the deal closes, with additional possible payouts of up to $20 million in total in 2011 and 2012 if certain financial targets are hit.
MSLO did not acquire Emeril's Homebase, which includes 11 restaurants and Lagasse's corporate office in New Orleans.
Importantly, management said in a conference call Tuesday that Lagasse has signed a 10-year employment contract with MSLO.
CFO Howard Hochhauser told analysts that the Emeril business is particularly attractive because it is "asset-light and high-margin."
Wall Street also thinks MSLO is getting good bang for its buck. The firm's stock closed up 17.3% at $7.19, leading Tuesday's gainers on The Hollywood Reporter's Showbiz 50 stock index.
"It's a great strategic fit and complement to the core Martha franchise of entertainment and cooking," RBC Capital Markets analyst David Bank said. "It also diversifies their dependence on Martha's brand."
At about 6.5 times operating cash flow, it also is a great price for a premium content business, he added. "There aren't many opportunities comparable to this out there," Bank said.
Asked if Emeril's popularity might already be in decline, he said: "Maybe the brand on its own has peaked. But there are enough synergies for the Emeril business to have (new) avenues of growth." Or as one of Emeril's catchphrases goes: They can kick it up a notch.
Daytime show "The Essence of Emeril" and syndication episodes of "Emeril Live" on the Food Network, as well as his food correspondent segments on ABC's "Good Morning America" are among the key content assets covered by the deal with MSLO.
But his TV future has been the subject of much debate as of late. In November, Food Network said it would end production on long-running primetime series "Emeril Live" in mid-December but continue production on "Essence."
Upon making the announcement, Food Network last year indicated that it was discussing specials and other programs featuring Lagasse for its schedule.
MSLO said Tuesday that there already are talks between Lagasse and Food Network parent Scripps Networks. "Food Network fully supports Emeril Lagasse and his new agreement with Martha Stewart Living Omnimedia," a spokesperson for the channel said. "We are happy to see that these two great brands will be combining forces, and (we) wish both of them the best. All of Emeril's shows will remain on the network, and we also look forward to working with him on future projects."
Lyne said Tuesday that talks with Emeril started thanks to MSLO chairman Charles Koppelman, who met the chef in the 1990s and whose family are big fans. In fact, kids are a secondary fan demo of Lagasse's, she said.
MSLO on Tuesday also said it has agreed to buy a 40% stake in online wedding planning firm WeddingWire with a path to potentially buying more later. Financial details weren't disclosed.
Kimberly Nordyke in Los Angeles contributed to this report.