Last-minute entrant Bloomberg L.P. has won the bidding for BusinessWeek, agreeing to acquire the venerable business magazine, BusinessWeek.com and other assets from McGraw-Hill (NYSE: MHP) for an undisclosed amount. BW puts the deal in the “$2 million to $5 million range” plus liabilities, including potential severance payments—not the $1 some joked about but the moral equivalent. Norman Pearlstine, the Time Inc. and Wall Street Journal vet who joined Bloomberg last year as chief content officer, will become chairman of BusinessWeek. Plans call for the deal to close quickly, with Dec. 1 as the target. (The full text of the Bloomberg and McGraw-Hill press releases is below.)

With the move, Bloomberg takes on BusinessWeek’s faltering financial situation, plummeting ad sales and all—and gains its resources, products, standing and valuable brand. Bloomberg’s execs expect to strengthen Bloomberg Television, using that brand and the magazine’s “world-class” journalists, and the company’s web presence; Bloomberg Chairman Peter Grauer said “the BusinessWeek.com and the Bloomberg.com web sites will have more unique visitors than any non-portal business and financial site.” (Rafat’s pre-sale take on the digital value is here.) According to BW, the sites have 20 million-plus uniques and combines revenues of $60 million.

The notion that Bloomberg will replace the BusinessWeek staff with its own has been a recurring theme since the company founded by New York Mayor Michael Bloomberg decided to make a run for what would be its first acquisition. But Daniel L. Doctoroff, president of Bloomberg LP, told BW: “We are not buying BusinessWeekto gut it. We are buying it to build it.” Pearlstine will be the liaison between the two staffs, with a BW publisher and editor-in-chief reporting to him. Eventually, the “Bloomberg” name will be added to the masthead.

On the surface, it may look like McGraw-Hill opted for a buyer from journalism over ZelnickMedia, which had some involvement from Thomson Reuters (NSDQ: TRIN) but is still a private equity firm. But it more likely came down to valuations—and the amount of liability a bidder was willing to assume. I haven’t heard a specific number on liability but was told to think of it in the “tens of millions.” (An earlier report showed more than $30 million in liabilities at the end of April.) But it’s hard to discount the importance to McGraw-Hill of appearing to do everything it can to ensure that the magazine founded in 1929 continues as a journalism enterprise. 

BW President Keith Fox told the staff in a hastily called late-afternoon meeting tweeted by Executive Editor John Byrne that the company met with 25 prospective buyers, handled 420 due diligence requests and Bloomberg was the best possible buyer. He also said there would be no layoffs between now and the close, small solace since that may only be six weeks or so. According to details reported by the NYT during the sale process, BW said it had identified about 20 percent of its 421-person staff to be cut in 2009.

Under McGraw-Hill, BusinessWeek has been bleeding money. The magazine lost $43 million in 2008—$17 million plus $26 million in overhead and rent to McGraw-Hill, according to the sale-process memo, and is on track to lose $41 million this year. That number could be skewed by severance charges.

—————————————————————————————-
BLOOMBERG AGREES TO ACQUIRE BUSINESSWEEK
Combination Will Create the Definitive Multimedia Business News Source

New York, October 13 - Bloomberg L.P., the leading provider of news and information for financial professionals, has agreed to purchase BusinessWeek, publisher of the world’s most-read business weekly, from The McGraw-Hill Companies, Inc. Terms of the agreement were not disclosed.

“The BusinessWeek acquisition will yield huge benefits for users of the Bloomberg terminal, and for our television, online and mobile properties,” said Daniel L. Doctoroff, president of Bloomberg L.P. “We couldn’t be more excited.”

“Although Bloomberg has built one of the world’s largest news organizations with more than 2,200 journalists, our primary audience has been our 300,000 BLOOMBERG PROFESSIONAL® service subscribers. They rely on us for high-value, market-moving news and insightful analysis.

“BusinessWeek helps better serve our customers by reaching into the corporate suite and corridors of power in government, where news that affects markets and business is made by CEOs, CFOs, deal lawyers, bankers and government officials who typically are not terminal customers,” Doctoroff noted.

Bloomberg L.P. Chairman Peter T. Grauer said, “The acquisition of BusinessWeek will strengthen Bloomberg’s online, television and mobile products. Together, the BusinessWeek.com and the BLOOMBERG.COM®Web sites will have more unique visitors than any non-portal business and financial site. We also expect to build BLOOMBERG TELEVISION® content around the powerful BusinessWeek brand and its world-class journalists.

“Bloomberg’s universe of market makers and BusinessWeek’s readership of decision makers create a powerful audience and a unique value proposition for advertisers. The reporting and analytical resources of Bloomberg and BusinessWeek are unparalleled in their ability to
deliver timely, distinctive and credible content to an influential and highly sought-after audience,” Grauer added.

Matthew Winkler, Editor-in-Chief of Bloomberg News said, “BusinessWeek, with its extraordinary context and perspective on the economy and companies, presents a giant opportunity for the BLOOMBERG NEWS® service to reach decision makers in the most important industries. We are thrilled to have such experienced journalists as our colleagues.’‘

To facilitate integration of the two news organizations, Norman Pearlstine will become Chairman of BusinessWeek. Pearlstine, Bloomberg’s Chief Content Officer, joined Bloomberg last year, building on a distinguished career as Managing Editor of The Wall Street Journal and
Editor in Chief of Time Inc. “Norm’s role will ensure that we fully capitalize on the combined strengths of Bloomberg and BusinessWeek,” Winkler said.

“Bloomberg looks forward to becoming steward of the great BusinessWeek franchise that McGraw-Hill has built over the past 80 years,” said Pearlstine. “We are uniquely positioned to preserve and build the market presence of BusinessWeek. Our shared values and complementary resources give us the editorial and technological expertise, data, analysis and depth of reporting to create a new model for the business weekly.”

BusinessWeek magazine, founded in 1929, is the market leader among business periodicals with more than 4.8 million readers each week in 140 countries, local language editions in Chinese, Thai and Bahasa Indonesian and licensees in 15 countries. Bloomberg is the number one source of essential breaking news stories, market coverage, investigative and enterprise reporting on global financial markets and the businesses, governments and individuals that rely on them.

In addition to BusinessWeek magazine, the BusinessWeek brand encompasses the BusinessWeek.com Web site, the Business Exchange online news and information service, SmallBiz magazine and BusinessWeek Events.

————————————————————-
NEW YORK, Oct. 13 /PRNewswire-FirstCall/—The McGraw-Hill Companies today announced it has agreed to sell BusinessWeek to Bloomberg L.P. The transaction is expected to close during the fourth quarter of 2009. Terms of the agreement were not disclosed.

“I am very proud of the tremendous contributions BusinessWeek has made to The McGraw-Hill Companies throughout its rich history. It is a truly outstanding franchise and the best source of business reporting in the world,” said Harold McGraw III, chairman, president and chief executive officer of The McGraw-Hill Companies. “We are pleased that we have reached an agreement for BusinessWeek to be acquired by Bloomberg, which shares the same high standards for editorial independence, integrity and excellence that have long defined BusinessWeek.”

“BusinessWeek will be a powerful addition to our portfolio of leading news and information services,” said Peter T. Grauer, chairman of Bloomberg L.P. “BusinessWeek is one of the business world’s most recognized and trusted sources of news and insight, and we believe that it will be highly valued by our customers worldwide.”

The transaction will enable The McGraw-Hill Companies to continue focusing resources on building the size, scale and global presence of its leading brands across fast-growing worldwide markets in financial services, education and business information.