The revelation on Monday, Feb. 19, that Goldman, Sachs & Co.
was poised to enter the magazine business left more than a few people confused.
Here was a publicly traded company, ready to invest $1 billion in a business
that seems to be teetering on the brink.
How committed Goldman is to the magazine world is uncertain.
According to one source familiar with the situation, that $1 billion may go
unspent if Goldman can’t find the right C.E.O.
“If they don’t find the right person they’d be happy with,” said
the source, “don’t expect them to do anything. If they’re doing a deal like
they’re talking about, I think they need their first choice.”
That might be difficult, since all the reported candidates
represent the lions of the trade. The list-first reported by Advertising Age , which also broke the Goldman
story-includes Condé Nast Publications president and chief executive Steve
Florio; Fairchild Publications president and chief executive Mary Berner; Don
Logan, chairman and chief executive of AOL Time Warner’s Time Inc.; Hearst
Magazines president Cathleen Black; Gruner & Jahr U.S.A. Publishing
president and chief executive Dan Brewster; Hachette Filipacchi Media president
and chief executive Jack Kliger; and Time Inc. executive vice president Mike
They were unsurprising candidates all. But some wondered: Were
they the kind of innovators a newcomer like Goldman might need to shake up the
print business? “They’ve named all the obvious people; I don’t know if that
necessarily makes it the right move,” said Eric Blankfein, vice president of
Horizon Media, a media buying company. “If they feel this business is built on
an antiquated structure, why would you try and get people used to that
structure-[who], in fact, created the structure? It was confusing to me.”
A source at Goldman, meanwhile, said that the money would come
from the Goldman Sachs Capital Partners 2000 fund. The source went on to
speculate that such a deal wouldn’t happen, since investments from that fund
have been much lower than $1 billion, typically between $100 million and $300
In any event, if Goldman has any particular plans or magazines in
mind, it has kept its mouth shut, even to potential C.E.O.’s. One executive
approached by the investment bank said that the company, while open about the
others it was courting, seemed murky, revealing neither the possible timing of
a launch for the division or what titles it was likely to acquire.
“They said ‘special interest,'” the executive said. “Quite
frankly, I don’t know what that means.”
Then again, Goldman may know exactly what it wants to do but is
being strategically coy, even to potential C.E.O.’s. One industry insider
familiar with the deal put the Goldman strategy this way: “What happens when
you’re putting something like this together is that you don’t want anyone to
know what you’re up to, because you don’t want to piss anyone off.”
“In approaching C.E.O.’s,” the source said, “you don’t want to
say anything particular. You tell them you’re ready to buy assets. You say,
‘Sign up, and we’ll look for them together.'”
To be sure, they’re ready to look. As one source put it, the
company’s failed bid to buy IPC Group, the European magazine group, last year
showed that Goldman “had a big appetite for a big deal in the sector.”
And why not? The company is
already an investor in Village Voice Media, which owns The Village Voice . Industry experts said a potential move by
Goldman represented an ideal opportunity for the company at a time when media
valuations hover near the bottom.
“Why get in now?” said Jeff Dearth, a partner with DeSilva &
Phillips, the media investment bank. “Prices have fallen to the lowest they’ve
been in awhile. If they can wrest something away, it’s a great opportunity.”
“It’s important because of its size,” Mr. Dearth said. “A billion
dollars is not something to sniff at. It represents an opportunity to create a
platform, add to it, then flip it after a period of time.”
Richard Mead, managing director of the Jordan, Edmiston Group,
another media investment bank, agreed. “I’m surprised they haven’t done it
sooner,” he said.
Through a spokesperson, Goldman declined to comment for this
story. And while the company remains tight-lipped about potential acquisitions,
one ship seems ready to be boarded: Primedia, publisher of New York and Seventeen .
The company, as of last September, currently carries $2 billion in long-term
debt and has already sold off profitable holdings like Modern Bride and Bacon’s Information Unit. Neither Henry Kravis, of Kohlberg, Kravis, Roberts
& Co., which controls Primedia, or Primedia’s chairman and chief executive,
Tom Rogers, returned calls for comment on this story. But Reed Phillips,
managing partner with DeSilva & Phillips, put it this way: “Primedia’s the
most obvious candidate here; they have so much debt and the stock price is so
low. I think K.K.R. will be willing to sell at some point, and Goldman has the
money to make it happen.”