May 14 (Bloomberg) -- Billionaire investor Ron Burkle agreed to buy Motor Trend, Hot Rod, Surfer and 75 other magazines from Primedia Inc. for about $1.2 billion in cash.

Source Interlink Co., controlled by Burkle through his Los Angeles-based Yucaipa Cos., plans to integrate the magazines into its retail distribution network, said Source Chairman Michael Duckworth on a conference call today. Source shares fell 15 percent, the most in more than four years, after Duckworth couldn't project savings from the acquisition.

Burkle, who made an unsuccessful bid to buy newspaper publisher Tribune Co. with Eli Broad, will control magazines that cover interests ranging from yachting to photography and dressage. Source Interlink, based in Bonita Springs, Florida, is also buying about 90 Web sites. The Primedia group had 2006 sales of $524.8 million.

``While you have a lot of theoretical synergies, you don't have a lot of hard and fast facts, so investors are skeptical here,'' Barry sine, an Oppenheimer & Co. analyst, said in an interview. He said that was why Source shares declined.

Source stock fell $1.01 to $5.79 at 4 p.m. in Nasdaq Stock Market composite trading. Shares of New York-based Primedia rose 33 cents, or 13 percent, to $2.82 in New York Stock Exchange composite trading.

Gains Hard to See

``We find it difficult to see where many opportunities exist'' for the acquired group to add to Source's profit, Donald Trott, a Jeffries & Co. analyst in New York, said in a note to investors today.

Trott, who rates the shares ``hold,'' called the price Source agreed to pay ``rather lofty'' and said borrowing costs of an estimated $110 million a year could exceed the group's operating profit. The group's operating profit last year was $75.4 million.

Primedia, controlled by private-equity firm Kohlberg Kravis Roberts & Co., will be left debt free, Chief Executive Officer Dean Nelson said in the statement. The sale caps a five-year drive by Primedia to sell assets to pay down debt and focus on its free auto and real estate guides. The company, which listed $1.31 billion in long-term debt on March 31, sold its Channel One educational television business last month.

Proceeds

Proceeds from this sale will be about $1.15 billion, after related fees and expenses, Primedia said in a regulatory filing.

Primedia's 8 percent bonds maturing in May 2013 rose 2.13 cents on the dollar to 105.88 cents on the dollar, according to Trace, the bond-price reporting systems of the NASD. The yield on the $300 million issue fell to 5.8 percent, or 94 points over U.S. Treasuries.

Source holds about a one-third of the U.S. market for retail magazine, compact disc and DVD distribution, Sine said. The acquisition gives the company a chance to meld its magazine distribution business with the publications themselves.

``Instead of just owning content or providing distribution, you're integrating the two,'' said Sine, who is based in New York. He rates Source shares ``buy'' and doesn't own them.

Burkle's Yucaipa Cos. has controlled about one-third of the shares in Source Interlink since 2005, said Source spokesman Dean Heine. Source Chairman Duckworth is a Yucaipa partner. Yucaipa consults on mergers and acquisitions and invests in companies in underserved communities. Former U.S. President Bill Clinton, a Burkle friend, is a paid Yucaipa adviser.

Steve Parr will remain president of the magazine group after its sale, which is expected to be completed during the third quarter.

Soap Opera Digest and Soap Opera Weekly magazines are also part of Primedia's Enthusiast Media group. Other titles Source Interlink is buying include Automobile, Lowrider, Power & Motoryacht, Snowboarder and Horse & Rider.