Rivals circle Primedia assets

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New York, Soap Opera Digest and Channel One are seen as prime candidates to be put up for sale by Primedia, and there's no shortage of potential buyers.

The Primedia of the future wants to be tightly focused on consumer-enthusiast titles-ranging from Automobile to Arabian Horse World-and the company's majority investor, Kohlberg Kravis Roberts, is expected to look at selling assets that don't fit in with that mission. Already executives are war-gaming which properties those might be.

likely targets

The first titles likely to get for-sale signs, according to informed Primedia observers: New York, Soap Opera Digest and Soap Opera Weekly (the latter two are the only weekly magazines in its wide-ranging portfolio), as well as its Channel One unit, which had been thought to have good adjacencies with the already on-the-block Seventeen.

A spokeswoman for KKR, which owns 60.2% of Primedia, declined to comment beyond stating, "Other than Seventeen, there are no other publications being sold right now"-a statement that falls somewhat short of assuring the company will remain intact.

Last week, Chairman-CEO Thomas S. Rogers resigned over what insiders said was a clash with KKR over future strategy.

A Primedia spokesman declined to comment on future company moves or its finances. Through his assistant, Mr. Rogers declined to comment.

New York looks to drum up the most interest, thanks more to its inherent glamour premium rather than its financial performance. An executive previously familiar with the financials placed the title earning profits of $1 million to $2 million on revenues around $40 million to $45 million.

Potential bidders include Conde Nast Publications, Wenner Media and Emmis Communications. Emmis owns Los Angeles and played hard for Primedia's Chicago, which was eventually won by Tribune Co. Also a possibility, and the factor cited as most likely to drive up the price, would be a newcomer to the magazine business seduced by the prospect of owning New York.

Potential players for the soap titles include American Media, which controls checkout racks crucial to the title, and Bauer Publishing, the New Jersey-based newsstand-heavy publisher of two Soaps In Depth titles.

Primedia's business-to-business unit, portions of which have been the subject of several approaches by interested parties, according to involved executives, may have a potential sale delayed because of depressed cash-flow fundamentals broadly impacting that sector.

Spokespersons for all of the above companies declined to comment or did not respond to messages.

No time frame is set for possible divestitures, and at least one informed observer said no clear decisions concerning which titles go next have been made.

The exit of Mr. Rogers, who clung to the growth-via-synergy-and-multimedia strategy he was brought aboard in 1999 to execute, was said by a close observer to stem from clashes with KKR, which pushed for a more tightly focused portfolio-and further asset sales.

focused approach

That the interim chairman of Primedia is now Dean B. Nelson, who oversaw an 18-month review of Primedia's operations as head of KKR's Capstone Consulting, testifies to KKR solidifying its grip on Primedia strategy.

Still, internal discussion outlined a more focused approach even slightly in advance of Mr. Rogers' exit.

Wall Street has remained resolutely unimpressed by Primedia. At the time Mr. Rogers' appointment and the multimedia strategy was announced, Primedia's stock rose to $12.38-a level KKR dearly hoped Mr. Rogers would improve. The day his exit was announced, Primedia's stock closed at $2.85.

The oft-maligned run of Mr. Rogers at Primedia nonetheless saw the company evade the darkest scenarios some envisioned-like it being unable to make its interest payments-and the company hit earnings targets in '02 initially derided as impossible.

But the company remains heavily leveraged. Despite asset sales that totaled $345 million in the wake of its 2001 acquisition of Emap USA, Primedia's long-term debt at the end of 2002 matched where it stood at the end of 1999: $1.73 billion.

"There's just a real weariness in the investment community about debt," said Bear Stearns analyst Kevin Gruneich. "Don't expect KKR to hold onto Primedia for another decade."

contributing: bradley johnson

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