MEIGHER TALKS TO SUITORS AS IT EYES NEXT LEVEL: NO DEAL IMMINENT, BUT FRESH CASH NEEDED IF COMPANY IS TO EXPAND

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Meigher Communications has been approached by two companies with offers to buy or invest in the 5-year-old upscale magazine group, said Chairman-CEO S. Christopher Meigher III.

While Mr. Meigher denies industry rumblings he's actively seeking additional investors, he said he is talking to the suitors.

Others with knowledge of the talks said they are at a preliminary stage and no deal is imminent.

"We have been approached with two serious offers through John Suhler, one overseas and one domestic. And we are considering some options," Mr. Meigher said. Mr. Suhler is president of Veronis, Suhler & Associates, an investment banker specializing in media.

IN A HOLDING PATTERN

Industry analysts and executives said Meigher Communications -- publishers of Garden Design, Saveur and Quest -- is essentially in a holding pattern. The company makes enough money to operate, but lacks sufficient capital to expand, they said, despite implementing cost controls over the last year.

Mr. Meigher acknowledged "cash flow is tight," but said that's to be expected at any entrepreneurial company. A recent internal memo restricting the use of cellular phones and car services was said to have irked some sales staffers; one said costs are being contained even as staffers are feeling more pressure to meet high sales goals.

"I'm a pretty tough guy about costs . . . and have always run this company on tight cash. But we have never missed a payroll and have no creditors banging on the door," Mr. Meigher said.

CAN CONTINUE WITHOUT HELP

Although he said Meigher Communications does not need investors to continue operating, he said current investors do eventually want to see returns, and said additional investors will be needed if the company wants to expand its stable of titles.

"We do want to start a shelter book," Mr. Meigher said. "We can do some of it out of existing cash flow, but not all."

The company is also believed to be eyeing potential acquisition targets, including Capital Publishing, parent to personal-finance magazine Worth. Mr. Meigher declined comment on Capital, but he and others said additional investors would definitely be needed for such a buy.

'A VERY TOUGH QUESTION'

When asked if he would sell his company or give up a controlling stake, Mr. Meigher said, "That's a very tough question that I haven't had to face yet. That's a decision we would make with our partners . . . We want to get bigger, add titles, whether we launch them or buy. I'm not sure if we would finance that internally or from the outside."

Industry analysts believe the company is at a critical juncture.

"He's going to need additional money to grow," said one. "He doesn't have enough to get to the next level. It takes capital to grow circulation."

Costs to advertisers have also risen, making ad sales more challenging. Saveur and Garden Design, now past the start-up phase, need to prove they can deliver their audiences and continue to be worth premium CPMs.

Both Garden Design and Saveur just barely met their rate bases of 325,000 and 300,000, respectively, according to Audit Bureau of Circulations figures for the first half. Garden Design's statement also noted 6% of the copies delivered were arrears -- copies sent after a subscription has run out.

"Arrears is a proven technique as long as you manage it. My goal is usually under 5%, so if we went to 6%, I'm not that concerned," Mr. Meigher said, adding that because of the expense of producing each issue there's no reason to deliver rate base bonuses.

Garden Design will raise its rate base to 350,000 for 1998; Saveur will raise its rate base to 330,000. Both titles will publish eight times next year.

3 ROUNDS OF FINANCING

Mr. Meigher has raised three rounds of financing in the five years since his company was launched, from sources as disparate as former Time Inc. executives, AT&T Corp., Prudential Insurance Co. and investment bankers Allen & Co. His investors, he said, are "in for the long haul," noting his limited partnership

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