Petersen Publishing Empire May Be Sold
Magazine publisher Petersen Cos., whose titles include Motor Trend, Teen and Guns & Ammo, said Monday it is in talks to be acquired by British media company Emap, reportedly for $1.2 billion.
Petersen sells 126 special-interest magazines that focus not only on autos and youth but also on outdoors, photography and sports. It also has an acquisition of its own pending that would increase its publications to 132.
Emap publishes consumer and business-related magazines, including Empire and FHM, and has interests in radio stations and communications. Like Petersen, many of its magazines are aimed at a male audience.
The potential deal comes only two years after Petersen founder Robert E. Petersen sold control of his Los Angeles-based publishing empire to an investor group, and only a year after the group took Petersen Cos. public at $17.50 a share.
Petersen and Emap both issued terse statements confirming their negotiations, but they declined to provide details or comment further. However, the Dow Jones news service quoted an unidentified source as saying Emap is expected to offer $34 for each of Petersen’s shares.
In response, Petersen’s shares soared 36% on Monday; the stock closed at $31.31 a share, up $7.81, in New York Stock Exchange composite trading.
A merger would make “sense from both [companies’] perspectives,” said Michael Beebe, an analyst at Goldman, Sachs & Co. in New York. “Petersen has very little international exposure. Emap would gain exposure in the U.S.”
A buyout, if completed, also would appear to be a home run for Petersen Chairman James D. Dunning Jr., Chicago investment firm Willis Stein & Partners and other members of the investor group that acquired Petersen in 1996 for $450 million--or about one-third the price Emap reportedly will offer. Moreover, the deal was a leveraged buyout, in that the Dunning group used mostly borrowed cash to make the purchase.
Robert Petersen, who declined comment, also was one of the group’s investors and he still owns 3.6 million shares, or 13% of the company, according to Petersen’s 1998 proxy statement. Under a $34-a-share bid from Emap, his stake is valued at $122 million. Petersen already is one of the richest Americans with a net worth of nearly $700 million, according to Forbes magazine.
An East Los Angeles native, Petersen started the company in 1948 when he and a partner began publishing Hot Rod magazine.
Hod Rod remains one of Petersen Cos.’ largest magazines. Others include Motor Trend, which had an average paid circulation of 1.1 million as of Dec. 31, 1997, and Guns & Ammo, with 592,000.
But its biggest title is Teen, a monthly magazine aimed at teenage girls that had a circulation of 1.8 million.
Since acquiring the business, Petersen’s current management has been working to pare the company’s debt load--its long-term debt totaled more than $230 million as of Sept. 30--and other costs, while still growing its business with the help of acquisitions.
The debt is a one reason Petersen lost $1.8 million in the first nine months of this year on revenue of $229 million. But excluding its interest costs and one-time charges, Petersen posted a $28-million operating profit for the nine months, up from $6 million in the prior-year period.
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Bloomberg News was used in compiling this report.
