Advanstar Backers Looking to Cash Out

Company admits CSFB has been hired to gauge buyers' level of interest

By Margo McCall -- Tradeshow Week, 7/18/2005

Like many financial players these days, the backers of Advanstar Communications are thinking now might be a good time to recoup their investment.

Advanstar CEO Joe Loggia confirmed that the investment banking arm of Credit Suisse First Boston has been retained to help the company explore its "strategic alternatives," including sale of the company.

Loggia said he went public so the company's 1,000 employees would be aware of the situation. He added that in recent weeks, Advanstar — which is backed by DLJ Merchant Bankers, a CSFB private-equity fund — has been "flooded with calls" from potential buyers.

Loggia's words echoed those of Primedia CEO Kelly Conlin, who revealed in late April that CSFB had been retained to help it sell the business information unit, a producer of more than 100 Web sites, 70 publications, 50 directories and 25 events in a variety of sectors.

Advanstar could prove more attractive, however, because its portfolio of 75 Web sites, 57 exhibitions and 55 publications is more tightly focused, concentrating on the fashion, life sciences and power sports sectors.

The recent sale of five divisions to Questex Media was intended to transform Advanstar from a typical business-to-business company into a market-focused firm. "It's not the same company it was a few years ago," Loggia said.

That Advanstar's private-equity backers are trying to recoup their investment is no surprise. DLJ bought Advanstar in 2000 for $900 million, in what remains one of the largest tradeshow deals ever.

The company had been long rumored to be contemplating an initial public offering. However, lately B-to-B companies are more popular with private-equity funds searching for promising investments.

Bob Crosland, managing director for AdMedia Partners, suspects that CSFB representatives sniffed out opportunity while looking for a buyer for Primedia. "They've already been out there testing the waters. They might have discovered something."

He added that exploring a sale makes sense, since the IPO market remains lackluster.

And B-to-B companies are fetching top dollar. JP Morgan forked over $650 million, or nearly 14 times operating cash flow, for Veronis Suhler Stevenson's Hanley Wood. Apprise Media paid $200 million, or 12 times operating cash flow, for VSS' Canon Communications. And U.K.-based T&F Informa paid $1.4 billion, or 16 times operating cash flow, for IIR Exhibitions.

Joel Novak, managing director at New York media bank Berkery, Noyes & Co., said he expects high buyer interest in Advanstar, because of the strength of its MAGIC Marketplace shows and medical unit. "They're very good properties," he said. "They should be able to command double-digit multiples."

Advanstar in 2004 generated $378 million in revenue, compared with $306.8 million in 2003. The company reported a $51.2 million 2004 net loss, up from $49.4 million in 2003. Its debt as of the end of the year was $612.9 million.

The list of rumored potential bidders includes JP Morgan-backed Ascend Media, which last year acquired three companies in the medical sector; Apprise Media's Charles McCurdy, backed by Spectrum Equity; ABRY Partners, the Cygnus Business Media backer that recently purchased F&W Publications; Warburg Pincus; and former Advanstar Chairman and CEO Bob Krakoff, backed by the Blackstone Group.

"There will be a lot of financial players after this property," Novak predicted, adding that Krakoff will likely be highly motivated to acquire the company.

Krakoff was a bidder for Thomson Media and considered Canon and Hanley Wood. Will he seek to buy the company he spent a decade overseeing? "I think the answer is, Blackstone and myself will take a look at it," Krakoff said.

Crosland said that Krakoff's familiarity with Advanstar should give him an edge. "Nobody knows it better than him," he said.

Krakoff acknowledged that the five divisions' sale has changed the company structure. But, he added, "It won't be too hard for me to figure it out."

Back in 2000, on the cusp of the company's sale to DLJ, Krakoff issued a similar statement to Loggia's, saying it was "the right time to explore the marketplace."

The former Reed executive said he's witnessed other periods when financial players were particularly active, and recommended casting "a jaundiced eye" at the reported valuations. He added that, in the case of Canon and Hanley Wood, "if we wanted to pay the price, we would have."

For his part, Loggia, a former accountant and police officer, said he is prepared to stay or leave, depending upon the buyer's desire. "I've done lots of things in my life. If there's someone who wants me to stay, I'll stay. If there's someone who wants me to leave, I'll leave."

Any transition should be eased by the late-June renegotiation of Loggia's employment contract. Besides a two-year extension, $625,000 base salary and annual bonus, and two years' salary in the event of termination, the agreement provides accelerated stock vesting and a "change in control" bonus of up to $4 million for Loggia in the event the company is sold. He also signed a new non-compete and confidentiality agreement.