Veronis units merge

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Veronis Suhler Stevenson is seeking a chemical solution. Last month, media merchant bank VSS announced that financially troubled Chemical Week Associates, publisher of Chemical Week and Chemical Engineering, was merging with the slightly less troubled PBI Media, a newsletter publisher. VSS owns both companies through its private equity fund affiliate.

Additionally, VSS announced that PBI Media purchased the Chemical Business Services of SRI Consulting. Chemical Business Services includes high-priced, subscription products such as the Chemical Economics Handbook, Directory of Chemical Producers and Process Economics Program. Financial terms of the deal were not disclosed.

"It’s not dissimilar to when Reed [Business Information] bought CMD to put into its construction group," observed Roland DeSilva, managing partner of media investment bank DeSilva & Phillips.

Both the merger and the acquisition provide a glimpse into key trends in b-to-b media, including the diminished role of print advertising, the growing importance of subscription-based information, the rise of international markets and the increasing impact of private equity investment.

Chemical Week Associates has struggled just like the U.S. chemical industry it serves. Last year it cut jobs and sold a number of publications. Modern Plastics and Modern Plastics International, for instance, were sold to Canon Communications, another VSS holding.

Cost-cutting move

The move of Chemical Week to PBI Media is a bid, in part, to trim costs. Robert Crosland, managing director of media investment bank AdMedia Partners, said that with two struggling assets, "they really have no need for two separate management teams and overhead."

With the investment in Chemical Business Services, VSS intends to balance Chemical Week Associates’ reliance on advertising revenue with steadier subscription revenue. Chemical Business Services commands five-figure prices for its products, which are considered necessary information sources in the chemical industry.

"They have 90% renewal rates, and they’ve done almost nothing to market these products," noted Don Pazour, CEO of PBI Media, which publishes Cable World in addition to newsletters.

As a division of PBI, Chemical Week plans to market Chemical Business Services through the pages of its magazines. Additionally, PBI Media plans to create newsletters and conferences with the information produced by Chemical Business Services. Pazour expects to launch some of these products in the spring.

Hal Greenberg, managing director at VSS, said subscription revenue is a necessity for companies hoping to weather the vicissitudes of the cyclical advertising market. Beyond providing a reliable revenue stream, Chemical Business Services should also offer Chemical Week and its sibling publications a platform for expanding their international reach. Chemical Business Services has offices in Zurich, Tokyo, Beijing and elsewhere.

That global scope should also serve to protect Chemical Week Associates from economic cycles in one country or region. "In a processing industry the growth is not in the U.S.; it’s going to be outside of the U.S.," Greenberg said. "We talk about how it’s really hard times in the chemical industry, but that’s here. In China it’s booming."

Greenberg added that VSS believes it paid a reasonable price for Chemical Business Services. "We believe we’re at the bottom of the cycle for the chemical industry," he said. "At this point at the bottom of the cycle, you can buy things at attractive prices."

Impact of financial ownership

The shifting of Chemical Week to PBI Media offers a window into how financial ownership can impact a b-to-b media company. The deal among PBI, Chemical Week and Chemical Business Services had an added layer of complexity because Chemical Week was one of the few underperforming assets (and one of the few remaining assets) in VSS’ Fund II.

Meanwhile, PBI Media is one of several troubled assets in Fund III, industry observers said. In moving Chemical Week Associates from Fund II to Fund III, VSS gave the investors in Fund II an equity stake in PBI Media.

"It’s appropriate portfolio management," DeSilva said.

Kathleen Thomas, a former VSS managing director who now holds that title at communications industry investment bank Berkery, Noyes & Co., said the move showed that VSS still harbored optimism about Chemical Week’s future. "They’re making what I’m assuming is a relatively significant investment in that business as opposed to bailing out on it," she said.

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