The purchase fit the bill for what has now become a trademark of the dealmaking spree engineered by Hachette Filipacchi Magazines President-CEO David Pecker: Pick up a money-losing third- or fourth-tier title at a low price, trim back staff, plug it into a centralized sales operation and-presto!-turn a profit.
"As a publisher of special-interest consumer titles, my strategy is building critical mass," said Mr. Pecker, who claims to be armed with a $100 million war chest for future consumer magazine buys-and that's not counting the $20 million earmarked for start-up George, the political magazine edited by John F. Kennedy Jr.
Mr. Pecker is rapidly building his stable of consumer magazines, a plan he conceded might one day lead to a spinoff of the U.S. company from Paris-based parent Lagardere Groupe in an initial public offering.
At the same time, he is laying plans to branch out into business-to-business magazines.
The new trade group would be financed by Mr. Pecker personally and by Hachette Filipacchi, with backing from New York-based investment banking firms Lehman Bros. and McCown & Deleeuw. Mr. Pecker has already looked at Atlanta-based Argus Press, recently purchased by K-III Communications Corp., and the New York Law Journal, bought by Boston Ventures.
NO SIGN OF SLOWING
But the publisher of Elle and Woman's Day shows no sign of slowing down its main thrust into new consumer markets.
"With the acquisition of Travel Holiday, we're now active in 15 major markets, compared with eight when I started," Mr. Pecker said.
The latest deal boosts Hach-ette's U.S. operation to 28 magazines. Other recent purchases include Family Life, Mirabella, Video and Premiere, the latter purchased last June from K-III in a joint venture with Ron Perelman's New World Communications.
In the five years since Mr. Pecker became president, annual revenue has surged, hitting $550 million last year, up from about $250 million in 1990, the year before he got the top spot.
Profits in 1990 were an estimated $30 million. Mr. Pecker said the gross margin today is 16%, translating into a pretax operating profit of close to $90 million.
Still, some industry observers have knocked the company as a "bottom fisher" because of its penchant for avoiding spirited bidding wars to concentrate on less desirable titles.
Steve Florio, president-CEO at Conde Nast Publications, said his rival "has mapped out a very aggressive growth plan.
"But his strategy has never been very clear. That may be because he is very smart or because he doesn't have a strategy."
Mr. Pecker views himself as a "market contrarian" who takes chances on unprofitable titles such as Home (bought in 1991) and Metropolitan Home (1992).
"All the magazines we took over were losing money .*.*. and they all made money in their first full year under Hachette," he claimed.
For the acquired titles, the changes are wrenching. In the Travel Holiday deal, the editor and publisher were replaced by Hachette insiders and only 14 of 50 staffers were asked to stay.
"Because of their emphasis on group sales, their staffing levels and their overhead are a lot lower than other companies," said one former executive. "At some point, however, it becomes a question of how far does the rubber band stretch?"
Mr. Pecker, 45, was a key financial executive for CBS Magazines, which became Diamandis Communications Inc. in a $650 million buyout in 1988. In mid-1989, Paris-based Hachette paid $712 million for the slimmed-down company.
In September 1990, Peter Diamandis and several top executives resigned in a stormy meeting with the French board members. Mr. Pecker remained and took the reins, causing a permanent rupture with his former colleagues.
"My problems with David had nothing to do with his business acumen," Mr. Diamandis said. "He's a brilliant businessman. We just went different ways."
PECKER'S NEXT TARGET
Mr. Pecker is already said to be eyeing his next target, financially strapped Lang Communications, publisher of Working Woman.
Mr. Pecker denied he has a standing bid for the Lang titles if a current round of negotiations by Lang fails to produce new financing by an April 1 deadline. But he also said he'd be interested in the titles "if [they] become available."
Serious talks are also set to begin this week with Montreal-based Telemedia regarding a joint venture to publish Eating Well. Discussions are also under way to take over the Weight Watchers title from H.J. Heinz Co.