Westwood company set to buy National Lampoon.

Westwood company set to buy National Lampoon

Money-losing magazine spawned `Animal House' film

Westwood-based J2 Communications, a video production and distribution company, says it wants to buy National Lampoon, which has been America's comedy magazine for the past 20 years and the creative inspiration behind a handful of movies that include "Animal House."

J2 announced its plans to buy the magazine March 9. In an interview the same day, James P. Jimirro, president and CEO of J2 Communications, said he has signed a letter of intent to acquire all outstanding shares of National Lampoon stock. The sale is expected to be completed in late May, provided it is approved by shareholders of both companies. Jimirro and National Lampoon co-owners Tim Matheson and Daniel Grodnik said they expect the shareholders to approve the sale.

The letter of intent dictates that the sale will be a stock swap rather than a cash buyout. Each Lampoon stockholder will receive two-thirds of a share of J2 Communications common stock plus a warrant having an anticipated value of $1 for each share of Lampoon stock currently held.

Jimirro said National Lampoon will be run as a division of J2 Communications, which specializes in producing and distributing original home videos and has 70 titles on the market.

The sale came about when Matheson and Grodnik began searching for a "strategic partner" with money to help them revamp the magazine and make it profitable again. Matheson and Grodnik said that before meeting with Jimirro they talked to several other potential buyers but were disappointed to discover they offered only money and none of the strategic advantages of J2.

Jimirro said he believes the two companies agreed in concept to the merger during their first meeting on Jan. 20. The deal was put together over the next six or seven weeks, he said.

Matheson and Grodnik said production of the magazine will be moved from New York to Los Angeles and will be based in the same building with J2's video production team. The intent, they said, is to create a "comedy fortress" that will assemble and develop the best comedic talent of today and the next generation. Corporate offices will remain in Westwood.

J2 revenues totaled $7.5 million in 1989, Jimirro said, with a pre-tax profit of $750,000.

National Lampoon has lost money for the last nine years, including about $800,000 in 1989. It is also carrying about $1 million in debt. However, Matheson and Grodnik, who acquired a controlling interest of 13 percent one year ago, said changes they have made at the magazine have it back on the rise.

Circulation has increased by about 30,000 to 250,000 since the duo started making decisions, and subscriptions are up 15 percent. Ad sales have tripled, they said.

Jimirro said national video retailers are hungry for more comedy titles, and he is anxiously anticipating producing some under the National Lampoon moniker.

J2's best-selling release, "Dorf on Golf," starring Tim Conway, has become the most successful original comedy video ever produced.

National Lampoon home videos is just the most obvious of many creative ways the companies' strengths can complement each other, said Jimirro, who founded the Disney Channel and Disney Home Video before founding J2 Communications in 1986.

Jimirro explained that he was immediately attracted by the opportunity to merge operations with National Lampoon because his experience at Disney taught him the value of franchising and fostering "synergy" between creative teams.

Matheson and Grodnik also said they were optimistic about Lampoon home videos, something the company has never done. Meanwhile, several offers are on the table at Lampoon for both screen and television movies. Matheson said he and his partner hope to announce within four weeks new movie projects the company will pursue. Matheson also said Lampoon is looking to form alliances with movie and television production companies that it can plan on working with for years to come.

Lampoon will also profit by consolidating its operations in Los Angeles, Grodnik said.

"National Lampoon will have a `comedy fortress' and put it together with (J2's) video production so there is no loss of steam and they can cross pollinate," Matheson said. "One of the problems the company has suffered from was that no critical mass could be achieved."

The other problem that caused the magazine's ad sales and circulation to slump was the previous management's failure to "reinvigorate the company with new talent," Matheson remarked. He claims the success of the magazine's early years as well as ventures like the movie Animal House were engendered by a blend of comedic styles. In recent times, however, the magazine has been dominated by a low-grade sort of humor that appeals to a narrower audience, he said.

The magazine, which is observing its 20th anniversary this year, is already undergoing substantial change. Former Playboy executive Michael T. Carr has been hired as publisher and is credited with the magazine's 300 percent increase in ad sales. Billy Kimball, ex-Harvard Lampoon editor, will be installed as National Lampoon's new editor on April Fools' Day.

The magazine will also, be redesigned and published on a monthly schedule again. National Lampoon is presently being published once every two months. The duo offered no deadline date for completing the overhaul, but indicated the magazine's new team, printing schedule and design should be in place by the end of this year.