Emap's Magazine Holdings on Block.

The fate of Emap USA may be determined as soon as this week, as its parent company takes final bids from firms wanting to buy the magazine publishing empire.

Emap USA is the Los Angeles-based entity formed when Emap PLC purchased local publishing magnate Robert Petersen's magazine group for $1.2 billion in 1998.

Now, Emap is saying it paid too much.

"We paid a lot of money to enter the market," said Tom Moloney, former CEO of Los Angeles-based Emap USA and now chief operating officer of parent Emap PLC, which is based in the United Kingdom. "With hindsight, and the downside of the economy, that was probably too much. That left the company with a large amount of debt."

CEO Kevin Hand, who was in charge of the Petersen purchase, resigned suddenly in late May, and Robin Miller, the former CEO who helped build Emap, is now CEO and chairman of the L.A.-based company.

Emap USA publishes 61 magazines, with 50 operated out of Los Angeles. It employs 870 people, of which 500 are local.

Although Petersen holds an honorary chairman's title with Emap PLC, he has not been actively involved in the 53-year-old publishing group since selling 90 percent of his ownership in 1996 to a group of investors headed by Jim Dunning, now chairman and CEO of Ziff-Davis Media Inc. Two years later, the investor group sold its 90 percent stake and Petersen sold his remaining 10 percent stake in the magazines to Emap PLC for a combined $1.2 billion.

Emap PLC initially put its L.A.-based publishing outfit up for sale for an asking price of $700 million, but industry estimates of Emap USA's actual value have been as low as $500 million.

Three vie for company

Three companies have submitted bids for Emap USA: American Media Inc. (publisher of the National Enquirer and Star magazines), French media conglomerate Lagarde're (publisher of Car and Driver and Elle), and Primedia Inc. (publisher of Seventeen, New York and Soap Opera Digest).

Emap has not indicated whether it is interested in any of the bids, and additional bids are being accepted until mid-June.

Family Circle's G&J USA and AOL Time Warner have been mentioned as other interested potential buyers.

Few analysts believe Petersen himself would bid to buy back the Emap publishing group, even though the 74-year-old benefactor of the Petersen Automotive Museum bought Sports Afield magazine from Hearst Corp. last year.

Petersen did not respond to inquiries last week.

Most likely, any winning bidder would initially undertake due diligence on all the Emap USA magazines, but would probably end up buying only some of them, said Michael Schroeder, chief investment officer of Naples, Fla.-based Washmer Schroeder & Co.

"My guess is someone like AOL Time Warner might look at some of the publications they have and do some cherry picking to round out and complement their existing publications," Schroeder said. "But I'm not sure they would want to buy the whole thing."

That scenario runs contrary to Emap's statement that it is only interested in selling the group as a whole, and that it would not sell individual publications.

Growth areas targeted

Among the publications with the highest growth prospects are those that are sports-related, like Skin Diver and Bike, as well as Teen magazine, Schroeder said. One of the group's most successful publications, FHM (For Him Magazine), is the only magazine that Emap is keeping.

One of the Emap magazines with the most to lose is Guns & Ammo, which has suffered recently due to lower gun sales, the gun control movement and nationwide concern over violence, he said. Although the Emap automotive magazines like Motor Trend and Hot Rod should have little trouble selling, they have suffered from slower advertising sales -- another reason why Emap claims its U.S. group has suffered.

"The U.S. is experiencing an economic downturn in advertising that is quite bad," said Meg Geldons, European publishing analyst at Merrill Lynch in London. "Some people describe it as the worst in 10 years. It seems (Emap USA) is being affected by that partly because of its very high exposure to the automotive industry."

But the recession should not have affected the Emap USA publications that much, Schroeder countered.

While the economy has caused significant losses to high-tech publications, which depend on revenue from money-losing tech firms, overall advertising revenue has only slowed its pace of growth -- not declined.

"That's a convenient way to explain to shareholders why you're not making money," he said. "I'd look for other explanations."