With major boost from investment capital firm, Phillips splits into "Health" and "Wealth".

The highly profitable consumer health newsletters of Phillips International Inc., along with its nutritional supplements and vitamins, are being spun off, The Newsletter on Newsletters has learned.

A venture capital firm will control and be the majority stockholders in the company, which is called Phillips Health Inc.

The parent company, Potomac, Maryland-based Phillips International Inc., headed by Thomas L. Phillips, has grown into the largest privately held newsletter, magazine and book publisher in the U.S., with sales of more than $300 million and more than 14 offices in the U.S. and England. It publishes more than 100 newsletters, magazines and directories and other information products, as well as conferences and trade shows serving both consumer and business markets. It also is involved in the internet business and has a number of market-focused web sites.

NL/NL has yet to learn the name of the investment firm involved nor the amount of money that the firm will put up.

John W. Farley, corporate vice president for communications of PPI, made available an internal memo to staff about the development. It did not use the word "sale" but described it as a "restructuring of our consumer business into separate investment and health companies."

A year and a half ago Tom Phillips retained Goldman, Sachs & Co. to find a possible buyer for almost all of its newsletter and publishing properties. Then in Sept. 1998 Phillips announced that the company would "remain independent and grow to new levels of success on its own" with the possibility that it might eventually go public with an Initial Public Offering.

"The sale of the health part of the business makes a lot of sense," remarked one knowledgeable publishing broker.

"One of the problems that Phillips faced in trying to sell the business was that publishers didn't want to buy it because of the vitamin business," he said. "But by spinning off the health newsletters and nutritional supplements from the other publications Phillips will become more attractive to buyers in the publishing field if Tom decides to put it up for sale."

King to head Phillips Health

The health letters were operated under the Phillips Publishing Inc. (PPI) division. The new Phillips Health Inc. will be headed up by Robert S. King, who will move from president of PPI. King joined Tom Phillips as a partner in 1984 when the revenue of PPI was only $5 million. Today it is reported to be more than $160 million. Both King and Phillips will serve on the board of directors of Phillips Health.

The Phillips Health structure will also include Doctors' Preferred Inc. (DPI), a subsidiary of Phillips International,-reported to be extremely profitable. DPI was formed six years ago to market vitamins and supplements.

Sales of the health products by DPI are expected to exceed $90 million this year. This would be a 50% sales growth over 1998 sales. DPI states that it is the only "provider of nutritional supplements that are formulated exclusively by doctors."

The five health letters are the vehicles that drive the purchase of the vitamins and supplements. They are Health and Healing, Heart Sense, Health Wisdom for Women, Women's Health Advantage, and Alternatives.

The flagship health publication is Health and Healing, edited by Julian Whitaker MD., which reportedly "reaches 500,000 subscribers every month." The subscription price is $39.95. Dr. Whitaker created "Forward Plus Daily Regimen" multivitamin and the award-winning "Essentials" target supplements, along with 70 other products. DPI has marketed these since 1993.

Alternatives, edited by Dr. David Williams, a chiropractor and biochemist, "reaches more than 125,000 people each month." Subscription price is also $39.95. Dr. Williams formulated "Mountain Home Daily Advantage" multivitamin and two other supplements that are also marketed by DPI.

The internal staff memo stated that Phillips will sign a "letter of intent with a major investment firm to provide the financial resources we need to continue the rapid growth of our health business in an increasingly competitive environment."

Health-oriented investment firm

"The firm brings extensive experience," the memo continues, "in the natural health marketplace and is very enthusiastic about joining with our health team to grow Phillips Health Inc. into the #1 provider of natural health publications, products and services."

The other PPI publications include eight investment advisories as well as five mutual fund newsletters. These non-health-related titles will be spun off into a new company called Phillips Wealth Inc., which will be headed by John Coyle who had been senior vice president of PPI.

Phillips Health and Phillips Wealth will both continue to be operated out of the Montrose location in Maryland and will share some of the same services.

PBI unaffected

Most of the other Phillips publications come under Phillips Business Information Inc. (PBI), headed by Thomas C. Thompson, and will not be affected by the latest developments. Just last year PBI took over two other divisions of Phillips: Hart Publications and its publications in the gas, energy and petroleum fields, as well as Knowledge Industry's two computer publications.

PBI has some eight newsletters in the Electronic Commerce/Defense & Aviation Group, four newsletters in the Defense Group, including Defense Daily, 12 newsletters in the Electronic Commerce Group, and some 30 newsletters under the Media Groups, which include Marketing, Business & Finance, Interactive Multimedia, and Telecommunications.

Eagle Publishing spun off

A major change in the Phillips structure came four months ago when Eagle Publishing Inc. was spun off from PPI to become an independent company. Eagle publishes books, periodicals and newsletters with a conservative bent. Tom Phillips, noted for his conservative views and philosophy, became chairman of Eagle, and Jeffrey [pounds] Carneal was named president. Eagle's cornerstone publications are the 1944-founded weekly Human Events, which provides political news and analysis from a conservative viewpoint, and the 1991-founded Evans & Novak Political Report.

Also part of Eagle is Regnery Publishing, which has published many of the seminal works of the current conservative movement, including Conservative Mind by Russell Kirk. But it has also teamed with more controversial authors such as the Los Angeles police detective Mark Furman, who wrote about his part in the O.J. Simpson trial.

Eagle also publishes "quality Christian books for families" under the Christian Book Club name.

Eagle's list division maintains the rental of its own subscriber base and manages such other lists as Citizens United, Empower America, Forbes for President, and Ronald Reagan Presidential Foundation.

Tom Phillips may be the most successful entrepreneur in the newsletter business.

In January of 1974, with $1,000 from savings, Tom launched Phillips Publishing from his kitchen table. Today his publishing ventures bring in more than $300 million annually.

He has given unstintingly to the Newsletter Publishers Association--both in time and money. He was a founding member and board president and director. He has earned every honor possible, from the NPA Publisher of the Year (1989) to being the first member of the Newsletter Publishers Foundation Hall of Fame.

Tom is well known for his conservative political views and philosophy.

He is well respected and liked in the newsletter community for "sharing his ideas with colleagues" and for organizational skills unmatched by most publishers.

Perhaps the best tribute to Tom was given by one former Phillips staffer. "When my wife was grieviously ill in the hospital, he used to visit her. He didn't have to do that," he said. "I'll never forget his kindness during that difficult time."