Mr. Dunning and Chicago-based investment firm Willis Stein & Partners agreed Dec. 13 to purchase the technology magazine publisher from Ziff-Davis Inc. for $780 million in cash. The final price fell below the $1 billion many investors believed the publishing unit would fetch.
On the day the sale was announced, the stock declined $1.1875, down 6.3% to $17.625.
Kevin Gruenich, media analyst for Bear, Stearns & Co., was surprised at the low price.
"When he bought Petersen, it was seen as a high price for a turnaround," he noted, "but this is a low price for a turnaround. So that should work for him."
The deal encompasses more than 80 computer industry publications -- including PC Magazine, PC Week and Yahoo! Internet Life -- which will now become part of the company to be renamed Ziff-Davis Holdings. Not included are Computer Shopper and an interest Ziff-Davis has in Red Herring.
A critical aspect of the deal is the contractual relationship Ziff-Davis Holdings will have with ZDNet, the online unit kept by Ziff-Davis parent company Softbank Corp. ZDNet retains the right to use Ziff-Davis Publishing content online for five years in return for a royalty fee.
Mr. Dunning will be chairman-CEO of Ziff-Davis Holdings and chairman of Ziff-Davis Publishing. Mike Perlis will continue as president of Ziff-Davis Publishing. The deal is expected to close in the first quarter of 2000.
"The individual skill sets of the people who work here, the legacy of quality that Ziff-Davis has always had, the credibility of its publishing platform," Mr. Dunning said, "all of that makes me feel that out of all the publishing opportunities out there, this is my first choice of where I want to be."
Still, Mr. Dunning will face some challenges at Ziff-Davis. Ad pages this year at the publishing company's titles were off 25.3% to 20,813 through October, according to AdScope.
And then there is the matter of separating the publishing and online units.
Kelly Conlin, president of Ziff-Davis competitor International Data Group, noted that the trend in media today is toward integration, not the break up of units.
"Our customers are expecting, if not demanding, that we offer solutions that include print, online and events. It's hard to explain to customers why you wouldn't be pursuing an integrated media strategy," Mr. Conlin said.
According to Mr. Dunning, plans call for Ziff-Davis to acquire or launch new titles, and expand into live events and multimedia platforms.