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Within three weeks, Advance Publications is expected to complete the deal for American City Business Journals, paying a premium price of $269 million.

For Advance and Chairman S.I. Newhouse Jr., this is one of the company's biggest cash deals in recent years and seems to be a throwback to an earlier era when the company paid top dollar for newspapers in New Orleans, Cleveland and Portland, Ore. Those deals transformed the company's makeup and for a time in the late '70s and early '80s gave Advance the title of nation's top circulation newspaper chain.

The latest deal, announced Aug. 4 for $28 a share, was 13.5 times the operating profit of $19.86 million. Analysts estimate it was 20 times the company's free cash flow. ACBJ's 1994 net profit was $5.3 million on total revenues of $97.7 million.

Advance gains a company that has virtually defined the way small business titles are run-with a priority on paid circulation, hard-hitting editorial and a formula for compiling "best of" lists that helps on both the advertising and editorial front.

City and regional business books suffered through the stock market and real estate upheavals in the late 1980s, but now appear to be growing faster than the general consumer magazine market, said James Dowden, executive director of the Association of Area Business Publications and the City & Regional Magazine Association.

With 28 titles, ACBJ is the largest player in the arena, followed by City Media and Crain Communications Inc., parent company of

For Ray Shaw, 62, the CEO who took over ACBJ in 1989 in a stock buyout, it caps a remarkable turnaround. Struggling with too much debt after the 1987 stock market dive, the company was forced to shed some of its 36 titles. Mr. Shaw, a retired Dow Jones executive, had initially been interested in buying only the Charlotte, N.C., paper when he was offered the entire company. He teamed with Ed Gaylord, the billionaire head of Oklahoma Publishing and Gaylord Enterprises to form Business Journal Associates, which effectively took control of the stock.

Ironically, the deal that put Mr. Shaw in charge of ACBJ may also have been the deal that forced the dissolution of the company.

"My understanding is that Gaylord wanted out," said Brant Snavely, a stock analyst at Richmond, Va.-based Branch Cabell & Co.

But another media observer with knowledge of the deal insisted it was Mr. Shaw, a survivor of heart surgery, who decided the time had come to sell. He is expected to stay on and run the company.

Mr. Shaw said he decided to sell "because I felt it would be in the best interest of the shareholders."

Regardless of the scenario, merger and acquisition specialist Steve Rattner, a managing partner at New York-based investment banker Lazard Freres & Co., was contacted. Together Messrs. Shaw and Rattner drew up a list of about a dozen potential buyers and began shopping the company.

The list is believed to have included Knight-Ridder, Cox Newspapers and Dow Jones & Co. and financial players such as Forstmann Little, Boston Ventures and K-III Communications Corp.

In the end, the deal came down to four finalists, with the Newhouse team topping all others. A spokeswoman for Cox Newspapers, parent of the Atlanta Journal & Constitution, confirmed that the company had made a bid.

Why Mr. Newhouse made the deal may tell as much about the future of the Newhouse empire as it does about the turnaround in the city business market.

Said Newhouse biographer Thomas Maier, "Five years ago, [the Newhouse brothers had] a top-line media company. They are still the premier provider of print information in the country, but, with all the convulsive mergers in recent years, competitors-like Time Warner and News Corp.-have evolved into much bigger entities."

The ACBJ deal also gives the Newhouse family a potentially big window into a future that may be local and online, he added.

Down the road, Mr. Newhouse and his brother Donald are also planning for executive succession by family members, and some feel by diversifying now they could be setting the stage for a limited public offering.

Said Mr. Maier: "I think [the Newhouse family is] eventually going to have to go public to capitalize the company-otherwise they will have to be content to be a second-tier media player."

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