Primedia, Dennis interest dwindling: sources

NEW YORK (Reuters) - The auction for a division of magazine publisher Primedia Inc. (PRM.N) has attracted several private equity buyers, but the process is cooling amid concerns about the unit's growth prospects, sources familiar with the matter said on Friday.

Private equity firms Elevation Partners, Quadrangle Group and Veronis Suhler Stevenson are among the buyout firms interested in Enthusiast Media, the sources said, but their interest is fading. The Primedia unit was expected to fetch around $1 billion, but sources say that may be too high.

Sources also said that interest in the auction for Dennis Publishing Inc., publisher of "Maxim" magazine, is thinning amid concerns about its own growth prospects.

The two auctions underscore the challenges facing print media, which is struggling as readers and advertisers move online. The climate is especially hard for consumer magazines, with revenues from newsstands, subscriptions and advertising all under pressure from the Internet.

"Nobody will tell you magazines are going to be the fastest-growing business on earth," said Quadrangle Group founder Steven Rattner, speaking at the Reuters Hedge Funds and Private Equity Summit in New York this week. "You have to have realistic price expectations ... They are going to sell at single digits, or should sell, on a fully managed basis, on single digit multiples."

Rattner did say that magazines have a little less to worry about than newspapers, as they do not face the loss of classified ads.

"A lot of the content is special-interest orientated and people are still willing to pay for it," he said.

Rattner declined to elaborate on Quadrangle's role in either Enthusiast Media or Dennis Publishing. Veronis Suhler Stevenson also declined to comment.

Elevation Partners co-founder Bret Pearlman also declined to elaborate on the firm's role in Enthusiast Media, but he did say it skipped the Dennis deal because of pressure on core profits. To read more on that, please click on ID:nN10433765.

"I think there are certainly sellers that have extremely high valuation expectations," Pearlman said at the summit.

Interest appears to be fading for Dennis Publishing, which put itself up for sale in February. The deal would not include The Week, a politics and news weekly. Dennis declined to comment for this article.

"The (auction) has been remarkably quiet, and I don't get the impression it's an active process," said Thomas Kemp, a managing director at Veronis Suhler Stevenson, which focuses on the media industry. "There are a lot of secular challenges. You have a mature property, serving a demographic group that is moving online."

But Elevation's Pearlman said that opportunities do still exist for magazine carve-outs.

"Our perspective is that there are many traditional media brands that have been held hostage by larger traditional media conglomerates that have underinvested in the properties," he said.

Primedia said in February that its board authorized the company to explore the sale of its Enthusiast Media segment to help cut its debt load, hiring investment banks Goldman Sachs and Lehman Brothers to run the process.

Enthusiast Media, with titles like Motor Trend and Hot Rod, had revenue of more than $500 million in 2006, with estimated cash flow of around $100 million.

"The company has been very pleased with what has been a very robust auction," said Josh Hochberg, a Primedia spokesman.

But sources close to the process say the bidding field is thinning, with concerns about the lack of investment in core products, particularly digital media assets, not to mention worries about overall industry trends.

(For more on the Reuters Hedge Funds and Private Equity Summit, see ID:nnN10168454