The new management at Petersen Publishing Co. is backing up its earlier promise to expand the company's operations and it couldn't have picked a better time, according to industry analysts.
Earlier this month, Petersen, one of the largest magazine publishing companies in Los Angeles, announced that within the next few months it would launch an initial public offering expected to raise as much as $172 million.
"There's no question about now being a good time," said John Reidy, an analyst with Smith Barney. "My impression is that this is a very savvy magazine group."
Last August, former Hearst Corp. President D. Claeys Bahrenburg assembled a group of investors led by venture capital firm Willis Stein & Partners of Chicago that paid $450 million for the Petersen magazine empire. Its founder, Robert E. Petersen, holds a 15 percent stake in the company.
At the time, Bahrenburg promised to grow the company by adding new titles, entering new businesses like television production, and perhaps taking it public.
Since the acquisition, Petersen's top two executives Bahrenburg and Neal Vitale, a former group vice president with Cahners Publishing Co. have been credited with taking the company on a new and more profitable path.
Bahrenburg and Vitale have added 11 new publications to their portfolio, moved the group's sales division to New York and folded foundering teen magazine Sassy into the more successful youth title Teen. Petersen now owns 78 magazine titles including Motor Trend, Hot Rod and Guns & Ammo.
Petersen also recently signed a licensing deal with The Nashville Network (known as TNN) to create an automotive-themed cable television show based on the Motor Trend name.
"Since the management group bought that controlling interest, you can see a lot of interesting progress," said Reidy. "What's exciting about Petersen is, it appears to be licensing all kinds of things. You can't do that with Business Week and Time magazine."
For Petersen, the proceeds from the offering are badly needed to pay down debt from the recent acquisition.
Though revenues at the company have increased 4 percent for the first half of the year to $120 million, the profit side is another story.
The company suffered a net loss of $4.2 million in the quarter ended March 31, compared with net income of $5.4 million in the like period a year ago.
The loss was due largely to high interest payments. Vitale said the proceeds from the IPO will be used to retire $60 million in debt and $50 million in preferred stock. It is "way too soon to tell," whether additional income will be used to buy other publications, Vitale said.
"We're always looking, always hunting," he added.
Analysts agree that it's a good time to take a magazine company public.
"The (publications) market, overall, is very strong, and Petersen is taking advantage of that. It's a company that has done very well," said Brad Freeman, founder of L.A.-based Freeman Spogli & Co. which recently acquired a controlling stake in both Vibe and Spin magazines, and at one time was considering a purchase of Petersen.
Reidy points out that it's an excellent time to enter the market.
"Petersen's management has been able to demonstrate that they have the company on a strong upward growth track," Reidy said.
Petersen was launched in 1948, when Robert Petersen published his first issue of Hot Rod. The East L.A. native later created publications that grew from his personal interests in hunting, fishing and cars.
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