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Saga continues regarding potential sale of Ziff assets

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Rumors are once more swirling that tech publisher Ziff Davis Media is in play.

An item posted in late December by paidcontent.org, which covers new media, said investment banker Lehman Brothers is actively looking for buyers for Ziff Davis' Consumer Small Business Group and Game Group in what would be separate deals. The Consumer Small Business Group includes Ziff Davis' flagship PC Magazine, while the Game Group includes Electronic Gaming Monthly.

The report said private equity firm Quadrangle almost bought Ziff Davis' Enterprise group in November but that talks have since stalled. The Enterprise Group includes Baseline, eWeek and several other b-to-b media properties.

Robert Callahan, chairman-CEO of Ziff Davis Media, told Media Business that he would not comment on the report, nor would Quadrangle or Lehman Brothers.

"Quadrangle got cold feet on the print side," said one media investment banker, who asked not to be identified. "It was trying to buy Ziff's online portfolio, but I can't imagine Ziff selling online and not its print assets, which is what got the company in the position it's in right now."

The analyst added: "Ziff burned through a lot of cash in 2006, and the pressure is going to be on this year."

Ziff Davis Holdings, parent of Ziff Davis Media, announced in July that it is "exploring strategic alternatives" for the technology publisher and said the company retained Evercore Partners and Lehman Brothers as financial advisers to assist in a possible sale.

Since last summer there have been periodic reports of a possible Ziff Davis sale?either the entire company or in clusters?but nothing has materialized.

Private equity firm Willis Stein & Partners, which owns Ziff Davis Media, would likely take a loss "in the hundreds of millions" of dollars, according to an industry observer who requested anonymity.

Sales discussions are "not going well," the observer said. "They were aiming to have [a sale done] by the end of 2006. ? Some of [Ziff Davis'] books are in decent shape, and it's not an unattractive business. The question is how people value them and whether [potential] buyers want to go up against CMP and IDG."

If Ziff Davis Holdings tries to maximize its return by selling the business units separately, it would mirror the last time Ziff Davis changed hands. In late 1999 and early 2000, Japanese conglomerate Softbank carved up the company, selling Ziff Davis Media to Willis Stein, which bought the magazine assets for $780 million in cash, and ZDNet to CNET for $1.60 billion.

Ziff Davis' online revenue continues to grow significantly, which is partly attributable to the fact that the company essentially started from scratch in 2000 after selling ZDNet.

Ziff's consolidated EBITDA rose to $4.4 million for the third quarter of 2006, compared with $1.5 million a year earlier; the growth was primarily due to the company's online businesses. Online revenue through September increased 32%, while print revenue excluding closed publications fell 14%.

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