Emap Confirms $1.2-Billion Deal to Buy Petersen

Emap of Britain, moving to become one of the world’s largest publishers of specialized consumer magazines, confirmed Tuesday its agreement to buy Petersen Cos. for $1.2 billion.

The merger would swell the number of Emap’s magazine titles to more than 400 by adding the 132 Petersen publications, led by Motor Trend, Hot Rod, Teen, Surfer and Guns & Ammo.

Emap said it would use Petersen as a gateway to introduce some of its top European magazines to the U.S. market, and would support Petersen’s own aggressive program of buying additional specialty magazines.

“This is a deal that Emap has dreamed of doing,” Emap Chief Executive Kevin Hand said in a telephone interview. “Together we want to become the biggest specialist publisher in the world. Our plans are as simple as that.”

And at Petersen’s Los Angeles headquarters and editorial offices, there will be “none, zero” layoffs stemming from the purchase, Petersen Chairman James D. Dunning Jr. said in a separate interview. The deal “is about growing the business, not about cost-cutting,” he said. The firm has more than 600 employees.

Tuesday’s deal follows by three months Petersen’s acquisition of San Juan Capistrano-based Surfer Publications, which produces Snowboarder, Powder, Bike and Inside Golf magazines in addition to Surfer.

Petersen later moved the editorial offices of Powder and Bike to Colorado.

The merger, in which Emap would pay $34 for each of Petersen’s shares, also represents a huge windfall for Dunning and other members of an investor group that acquired control of Petersen two years ago from its founder, Robert E. Petersen.

The group, which was led by Chicago investment firm Willis Stein & Partners, bought Petersen for $450 million in a leveraged buyout, meaning it used mostly borrowed cash. It used $165 million of its own equity.

Dunning, though, discounted the importance of the enormous profit and noted that he plans to continue expanding the business by staying on as chairman of a newly created division called Emap Petersen.

“For me, this isn’t about money,” he said. “I’m challenged by the challenge.”

His investor group sold a portion of Petersen’s stock to the public a year ago, raising another $114 million. The stock, which soared 36% on Monday when the companies confirmed they were in talks, on Tuesday gained another $2.19 a share to close at $33.50 on the New York Stock Exchange after the deal’s terms were announced.

Emap, which also has interests in radio stations and business publications, has been battling British rival IPC Magazines Ltd. for supremacy in the market for specialty consumer and trade magazines. Emap has also tried for years to invade the U.S. market via an acquisition, and in fact attempted to buy Petersen two years ago but lost to the Dunning group.

The companies resumed talks three months ago, “and it became clear that we were both passionate about the printed product,” Dunning said. “As we got to know each other . . . it was clear that we could learn from each other, how the business was done here [in the U.S.] and vice versa.”

Moreover, Dunning said a global presence will be increasingly important for publishers of specialized magazines, because that “critical mass” will prove more attractive to major advertisers that want to peddle their message to a broader audience.

Emap isn’t yet saying which magazines it wants to bring to the United States, but Hand said it plans to target three main markets: men, teenagers and music fans.

Petersen “is a platform for Emap” to reach American readers, Hand said. Some of Emap’s current top-selling magazines are FHM (shorthand for “for him”); Motorcycle News; New Woman; and Empire, which is devoted to movies and other entertainment.

Dunning also emphasized how both companies want to use the merger to build a bigger presence among younger readers, namely the 12-to-24 age group, because demographic trends show that audience is growing briskly.

“We’ve already been shifting our portfolio [of magazines] to be very effective publishers in that arena,” Dunning said.