MARTHA STEWART SCOUTS FOR OUTSIDE INVESTORS;AS TIME INC. TALKS CONTINUE, THE ENTERTAINING MAVEN IS MEETING WITH ALLEN & CO.

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As Time Inc. and Martha Stewart try to negotiate a new contract, Ms. Stewart is said to be talking to Allen & Co. in a quest for outside capital.

It was Allen & Co. that first brought the Martha Stewart Living concept to the attention of Time Inc. executives six years ago.

One Allen insider told Advertising Age, "The person dealing with the Martha Stewart deal is Richard Fields." Mr. Fields, a managing director of the investment banker, said, "I can't say anything about that."

DEAL WITH MEIGHER

Allen two weeks ago agreed to make a second investment in Meigher Communications, the special-interest publishing company headed by S. Christopher Meigher, a former Time Inc. executive who shepherded the Stewart project during his days at Time Inc.

If Mr. Meigher is involved in coaxing Ms. Stewart to jump ship, he wasn't commenting last week. But most media executives believe that if Ms. Stewart cuts loose from Time Inc., she would have to affiliate with an existing publishing entity.

Conde Nast Publications President-CEO Steve Florio confirmed earlier reports that company Chairman S.I. Newhouse Jr. has met with Ms. Stewart.

There have been no subsequent meetings, said Mr. Florio, who didn't participate in the first meeting.

Clarkson Potter/Publishers, a unit of Newhouse-owned Random House, publishes Ms. Stewart's books.

Last week, Time Inc. executives made it clear their negotiations with Ms. Stewart are far from over.

"I'm sure that we will work out an agreement that is advantageous to both of us," said Time Inc. President-CEO Don Logan, who showed up at last week's Women in Communications' Matrix Awards, at which Ms. Stewart was honored.

MATRIX ENCOUNTER

During the photo session prior to the Matrix luncheon, Mr. Logan suddenly loomed up on the sidelines of the press room. Ms. Stewart walked toward him, smiling as she said in mock serious tone: "Ogre! Enemy!"

The two then embraced, kissed and chatted for a few seconds while two surprised photographers snapped away. Many were reading Mr. Logan's appearance as a sign that a truce was in the offing.

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