British Publisher Buys Petersen

In a move which will make it one of the world's biggest publishers, British publisher Emap PLC said Tuesday it is buying The Petersen Companies Inc., publisher of such speciality magazines as Motor Trend and Guns and Ammo.

Emap, which has been long wanted to break into the U.S. market, will buy the Los-Angeles based magazine publisher for $1.2 billion.

The deal will create a global publishing titan with nearly 360 magazine titles, combined revenue of $1.5 billion and more than 6,000 employees.

News of Emap's (EMA-LS) pending bid surfaced Monday after it confirmed it was holding talks with Petersen (PTN).

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PETERSEN (PTN)

Emap admitted that the price it's paying is "full" in relation to its historical financial results, but defended the price: "...The directors believe that this is justified by the leading market positions of Petersen's titles together with the performance and growth prospects of its businesses."

Emap said this, and the growth potential for advertising revenues in the U.S. market (Emap is heavily reliant on ad revenues), makes the acquisition worthwhile. The British publisher added that the acquisition won't dilute earnings, and won't impact on its earnings.

In a statement, Emap's chief executive Kevin Hand said: "Petersen represents the outstanding opportunity for us to secure a successful, well-managed business in the U.S. - the world's largest media market - and an important step towards fulfilling our international strategy. Petersen is the perfect fit."

Emap said it will use the Los Angeles publisher as a platform to launch its own international titles, including its highly successful "lads" magazine called FHM. It's also planning to launch Top Sante, its health title, in other markets.

After the acquisition, Petersen will become a North American division of Emap under Jim Dunning, the U.S. company's chairman. He would repot to Emap's chief executive Kevin Hand.

Willis Stein & Partners, a Chicago-based investment firm and the largest shareholder in Petersen, and key Petersen managers are voting for the deal. They collectively control 66 percent of Petersen's Class A shares and all of its Class B shares.

Petersen, with offices in New York and Los Angeles, was founded in 1948 by Robert E. Petersen with the launch of Hot Rod magazine. It now publishes 132 titles.

An investment group led by Willis Stein & Partners, James S. Dunning Jr. and Petersen management acquired the company from Petersen in 1996. The company has since launched or acquired 60 magazines, and went public in October 1997.

Petersen's other titles include Slam, Surfer, Snowboarder, Powder, Skateboarder, Skin Diver, PhotographicM and Motorcyclist. The company also produces trade shows and other events such as the Gravity Games an extreme-sports competition that will be broadcast on NBC next fall.

Petersen had revenue of $228.7 million in the 12 months ended Sept. 30.

Written By Suzanne Miller, CBS MarketWatch London bureau chief