Emap eyes options for unit in U.S.

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The troubled marriage of Emap PLC and its American unit Emap USA-for which it paid a whopping $1.2 billion in 1998-finally may be drawing to a close.

A prospectus, or book, for its largest American title, Teen, made the rounds earlier this year, said two industry executives who saw it. The valuations the company placed on the magazine-which, one of these executives said, were initially $80 million to $100 million-were reduced by half, and possibly even more.

"They still have their hook in the water," said one executive.

These executives also said Morgan Stanley Dean Witter & Co.-which handled the deal that brought Emap its Emap USA unit, then called Petersen Publishing-has quietly begun exploring options for the unit. They expect to receive books for Emap USA within a month to six weeks. A call to a Morgan Stanley Dean Witter executive involved with the Petersen deal, was not returned. (Another executive expected Citigroup's European investment-banking unit Schroder Salomon Smith Barney to handle the sale.)

Among potential bidders for portions or all of Emap USA's portfolio-which, aside from Teen, are heavily male special-interest titles including Hot Rod, Dirt Rider and Guns & Ammo-are American Media, Hachette Filipacchi Magazines, Time Inc. and Primedia.

According to an executive familiar with the company, top executives at Primedia convened to plot strategy for the expected sale March 9. A Primedia executive did not return a call seeking comment, and a spokesman said executives weren't available.

Inside Emap USA, which has seen a steady stream of stories concerning its fate in the past month, some executive comments sound carefully parsed.

"From what I know, it's not true," said one executive about Teen's fate. Asked about the company's future, the executive responded "No one in management has officially addressed this to employees."

"Emap is reviewing all of its options," T0m Moloney, Emap USA's CEO, told Ad Age March 15. "As of this date, we have neither received nor solicited offers for Emap USA." As for Teen, he said "the only fact is that we are still publishing Teen."

"We relaunch in the fall," he said, referring to the extensive redesign the magazine will undergo to focus exclusively on style, shopping and celebrities. "What more is there to say?"

Industry executives expressed doubt Emap will recoup its original purchase price. The deal was considered substantially overvalued when it was purchased from Jim Dunning, currently chairman-CEO and president of Ziff Davis Media. It's also been a disappointing performer. The company does not break out Emap USA's results, but noted when it released earnings last November, the U.S. was a "difficult marketplace." Emap's stock, traded in London, closed at the end of last week at $11.47, off a 52-week high of $22.84, and slightly above the 52-week low of $10.21.

According to Credit Suisse First Boston estimates, Emap PLC's EBIDTA-earnings before interest, taxes, depreciation and amortization-for the fiscal year ending this month will fall 15.1%, and pretax profits will fall 24.9%.

"People see the share price is depressed, and Kevin [Hand, Emap PLC's CEO] and the team have got to address the issue," Mr. Moloney said.

One industry executive put it slightly differently. "It's the biggest disaster to happen to an acquirer of magazines in some time. It's just a question of how long before they're willing to recognize this fact."

The news from earlier this month of Teen's remaking was widely seen as a sort of white-flag move from the venerable title.

Meanwhile, long-expected plans for Emap to bring over either or both of its U.K. music magazine Q or its fashion title Arena now appear questionable. "We'd love to bring over Q," said Mr. Moloney, "but a successful music magazine in the U.S. is far from a slam dunk." He also was thwarted by Dennis Publishing, which will launch Blender in the U.S. late this spring.

Dennis got fat by bringing over a U.K. lad title called Maxim-which trails Emap's FHM at home-and turning it into one of U.S.'s biggest magazine success stories.

As for Arena, Mr. Moloney said it was "probably behind Q in the pecking order."

Contributing: Mercedes Cardona

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