Goldman, Sachs & Co. is handling the auction and has set a deadline of June 21 for the return of first-round bids.
PRICE: UP TO $400 MILLION
Most observers expect a sale will be completed by late summer, with a final price tag estimated to be anywhere from $300 million to $400 million, more than 10 times cash flow.
"I think they will go for a lot of money," said Michael J. Wolf, partner and head of media/entertainment at consultancy Booz, Allen & Hamilton, New York.
The privately owned company, founded by car buff Robert E. "Pete" Petersen in 1948 when he launched Hot Rod with only $400, today includes a diverse mix of special-interest magazines, including Motor Trend, Drag Racing, Sport, 'Teen, Sassy and about 20 other monthlies.
Mr. Petersen, now 69, has said he hopes to sell the magazines as a block to a single buyer.
Industry executives who have seen the books said the company last year had revenues of $215 million with cash flow of approximately $21 million. Factoring out startups and unprofitable one-shots, cash flow was $31 million.
Among those expected to take a serious look: Boston Ventures; Peter Diamandis, through his new investment company Paladin Holdings; and Claeys Bahrenburg, who is plotting a return to publishing with backing from Lehman Brothers.
Also in the running are established publishers K-III Com-munications; Times Mirror; American Media; and Meigher Communications, among others.
Hachette and Walt Disney Co. are expected to stay out of the process, but could come back if individual titles are sold separately.
K-III THE FAVORITE
K-III Communications-seen by many observers as the favorite-has made little secret that it is strongly interested in acquiring the titles and recently improved its cash position with the refinancing of $1.25 billion in debt.
The Petersen titles could give the company-backed by Kohlberg Kravis Roberts & Co.-critical mass in a number of areas, including car titles, where Motor Trend would become the flagship for the 50 specialized titles picked up from McMullen & Yee.
Most of those titles are circulation-driven with few ad pages, giving the company a strong incentive to buy one of the market leaders and create ad package deals.
Similarly, Sassy and 'Teen could be repositioned to support K-III's market leader, Seventeen, one of the company's cash cows.
Contributing: Bradley Johnson.