Advanstar to sell several market clusters to start-up

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Advanstar Communications announced April 4 a $185 million deal to sell several of its smaller market clusters to Questex Media Group.

Advanstar agreed to sell its Advanstar's Information Technology & Communications, Travel & Hospitality, Beauty, Home Entertainment, Abilities and Portfolio groups to Questex. Those groups together generated about $100 million in revenue in 2004.

Questex is a new company formed by private equity company Audax Group and Kerry Gumas, VP-general manager of Advanstar's Information Technology & Communications Group. Gumas will be president-CEO of Questex.

Advanstar said it would use the proceeds for debt reduction as well as the funding of organic growth and potential acquisitions. The company retained what most industry observers consider to be its strongest media clusters-fashion, health care, science and pharmaceutical-which generated about $275 million in revenue last year.

Joseph Loggia, Advanstar's CEO, said the two separate companies will be more nimble and better able to implement innovations. "This is a strategy we've been working on in the past year."

Loggia said Advanstar is looking to remake what a b-to-b media company is. He said the company has requested new business suggestions from employees and that ideas have flooded in. One reason to divide Advanstar in two was simply to provide enough resources-money, people and time-to execute new projects properly, he said.

New strategy or final exit?

Observers disagree on whether the deal signaled a new strategy for Advanstar or the first steps in an exit strategy for the company's private equity owner, DLJ Merchant Banking Partners III, a fund managed by Credit Suisse First Boston Private Equity.

"This was a general housekeeping transaction," said Robert Crosland, managing director of media investment bank AdMedia Partners.

Some observers, however, speculated that the sale to Questex is not about strengthening Advanstar for the long term but readying it for sale in the short term. Some read the sale as the beginning of CSFB, which acquired Advanstar in 2000, executing its exit strategy.

By making itself a smaller company, Advanstar has made an initial public offering an unlikely exit strategy in the short term, observers said. Additionally, because private equity funds usually try to exit within a seven-year period, some observers expect subsequent divestment of Advanstar properties in the next two years. 

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