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International Brands Eyes EMAP Unit

Publishing: San Diego firm offers to buy U.S. magazine subsidiary but faces a reluctance to sell and financial hurdles.

February 05, 2000|From Bloomberg News

SAN DIEGO — International Brands Inc.'s online retail unit said it offered to buy EMAP's U.S. publishing business, which includes magazines such as Motor Trend and Teen, for an undisclosed sum to win access to its readers.

With a market value of about $206 million, San Diego-based International Brands would be hard pressed to buy Britain's EMAP, which has a market value of about $5.69 billion.

"It would need private equity backing to execute such a cheeky maneuver," said Louise Barton, an analyst with Investec Henderson Crosthwaite, who rates EMAP shares "buy." The publishing unit "is very much part and parcel of EMAP's long-term strategy, and they will not want to sell it," Barton said.

The International Brands unit, WorldBestBuy.com, said its friendly offer includes "various financial instruments and other considerations." The U.S. business for EMAP, the world's biggest magazine publisher, was formed when it acquired Los Angeles-based Petersen Cos. early last year. EMAP USA publishes about 130 magazine titles.

"EMAP USA is a tremendously well-managed, highly profitable but exceedingly conservative paper publishing company," Steven Zubkis, chief executive of WorldBestBuy.com, said in a statement announcing the offer. "Their Internet strategy, indeed their entire e-commerce strategy, is so muddled as to threaten the very future of the enterprise."

EMAP said it has no plans to cede its U.S. unit.

"We do not intend selling our U.S. business. It is an integral part of our strategy," a company spokesman said.

At the same time, EMAP said earnings at the U.S. operations would be hurt because of a 7% drop-off in advertising sales and higher-than-expected marketing costs in its fiscal third quarter. EMAP added that ad sales have recovered, however.

International Brands shares closed unchanged at $4.13 in over-the-counter trading.

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