Ziff-Davis Unit Files for Initial Stock Offering
Key3Media Group Inc., the Los Angeles company that operates Comdex and other popular technology trade shows, plans to raise as much as $30 million in an unusual direct offering of its new stock when it spins off from parent company Ziff-Davis Inc., according to a filing made Friday with the Securities and Exchange Commission.
About 92% of the new company’s stock will be held by current Ziff-Davis shareholders, including Japanese Internet company Softbank. When the spinoff is complete, Key3Media could have a market value of as much as $360 million, according to the filing.
The Key3Media spinoff is part of a broad effort begun by Softbank last year to restructure its holdings and become more of a pure Internet holding company. Its biggest investment is its 25% stake in Web portal Yahoo, which is worth about $17 billion.
“The structure of Ziff-Davis has not been viewed very favorably,” said Christopher Schulz, an analyst with the Spin-Off Report in New York. “Unwinding the whole structure and creating more clarity certainly makes sense.”
Softbank acquired the various components of what is now Key3Media in 1995 and 1996 and sold them in 1998 to New York-based Ziff-Davis. Softbank bought Ziff-Davis in 1995.
Ziff-Davis shareholders will receive one Key3Media share for every two Ziff-Davis shares they own, according to the filing. Key3Media will also sell 5 million of its shares for between $4 and $6 each to raise money for general corporate purposes. In addition, Ziff-Davis will issue 18 million stock options to its employees and directors.
When the spinoff is complete, Softbank will own between 46% and 60% of Key3Media, depending on how many stock options are exercised.
Analysts said it is unclear from the filing whether the company plans to sell the 5 million shares to the public--as in an initial public stock offering--or through a private placement. Either way, the shares will be sold without the assistance of an underwriter, which analysts said was unusual.
A Key3Media spokesman declined to comment on the offering, and senior executives of the company did not return phone calls.
Key3Media’s trade show business includes two of the most popular technology conferences, Comdex and NetWorld+Interop. Last year, there were 17 Comdex events in 12 countries and six NetWorld+Interop conferences in five countries. Together, these events accounted for 70% of Ziff-Davis’ revenue, according to the filing.
Key3Media also operates Seybold Seminars, JavaOne and five smaller conferences.
Trade show revenue has held fairly steady for the last five years, though profit has fluctuated, according to the filing. In 1999, Key3Media earned nearly $26 million in net income on $251 million in sales. Although revenue declined nearly 7% from the previous year, profit rose 35% during the same period. The company lost $2.3 million on sales of $276 million in 1997.
Key3Media collects about three-quarters of its revenue from information technology firms who rent exhibit space at its trade shows and from commissions it receives from companies who sell their services to exhibitors. The rest of Key3Media’s income comes from ticket sales, advertising and sponsorship fees, according to the filing.
The number of attendees and exhibitors at most of Key3Media’s events has been declining in recent years, but the company responded by raising the prices it charges for exhibition space, event sponsorship and advertising, the filing said.
Ziff-Davis shares closed Friday at $10.31, unchanged in New York Stock Exchange trading.
