The Trade Publisher IPO Fad Was Just That – September 19th, 2015

ttpipoPenton media became the latest trade publisher to go public, joining the New York Stock Exchange on Aug. 10 in a move driven by a spinoff from parent Pittway Corp., Cleveland.

Penton joins such publishers as CMP Media, Manhasset, N.Y.; Primedia Intertec, Overland Park, Kan.; and Ziff-Davis, Needham, Mass., all of which have gone public in the past 14 months.

“We’re an $18 billion industry this year . . ., but we’re not particularly a high-profile industry,” says Thomas Kemp, CEO of Penton, Cleveland. “The financial community really has just discovered on a more broad basis that we’re a fairly significant and fairly large industry.”

Trade show increase

Mr. Kemp said one of the reasons for the spinoff was that Penton’s revenue from trade shows has increased from less than 3% in 1996 to 13% in 1998. It’s expected to reach up to 30% of the company’s revenue by the turn of the century, he said.

“Traditionally, Penton has been a magazine publishing company,” he said. “But our strategy is to be more of an information company with strength in certain market segments and an array of media properties: Trade shows, online services, custom publishing.”

Trade shows and magazines “complement each other extremely well. And when you marry a trade show with a magazine, you add value to the position both of the magazine and of the trade show,” Mr. Kemp said.

The spinoff from Pittway also allows Penton to make these strategic acquisitions to boost strength in the company’s market segments.

Different motives

While Penton is just the latest in a list of trade publishers going public, those in the industry say the publishers’ motives are vastly different.

Bob Krakoff, chairman-CEO of Advanstar Communications, said CMP’s July 1997 deal was initiated by the Leeds family, which owns the company, because the company was trying to become more liquid. ZD’s IPO in April 1998 was initiated by a foreign investor who wanted capital.

CMP declined to comment; ZD had not returned calls at press time.

Daniel Ramella, president-COO of Penton, said, “Even though the individual reasons are different, the fact that we can all go public is a fairly recent phenomenon.”

Despite their reasons, the bright future of b-to-b publishing companies lends itself to public offerings, said Gordon Hughes II, president-COO of the New York-based American Business Press.

“From 1995 to 1996, the industry’s [advertising] billing was up 10.2%,” Mr. Hughes said. “For the past year, it was up 11.6%. We’re estimating 1998 over 1997 will be in the range of 8% to 10%. Those are three very dynamic years.”

He said the percentage of revenue from the high-tech and computer publishing segment has dropped from more than 40% to 35%. But overall ad revenue has climbed.

“The good news is that the strength of this industry comes from a broader base of advertisers [than computer titles],” he said. “Wall Street has taken notice of that.”

Hal Greenberg, managing director at Veronis Suhler & Associates, New York, said there hasn’t been a lot of competition for similar offerings on the public market until recently, when CMP went public.

Leo Kivijarv, director of research for Veronis Suhler, said his company’s latest projections for b-to-b publishing and trade shows forecast annual growth of 8.9% from 1997 to 2002 in U.S. spending.

The forecast for magazines is 8.8% compounded annual growth, and for trade shows, 9.1%, both well above the growth rate of 6.8% for the previous five years.

A key trend

Advanstar’s Mr. Krakoff said publishing houses historically have been represented on the stock market, noting The McGraw-Hill Cos., New York, which has been publicly traded since 1929.

He said Advanstar, which has been on an aggressive acquisition track the past two years, is considering a public offering.

Even for those private media companies that remain private, Mr. Greenberg said, acquisitions and mergers will be a key trend to follow.

“I see more consolidation and integration between business-to-business and trade show producers,” he said. “I think the advertising base is quite strong and those that get into trade shows will be able to serve their clients by offering more services.”

Stock compensation

In conjunction with Penton’s spinoff, the company acquired Donohue Meehan Publishing Co. of Chicago. Company executives William Donohue and John Meehan received stock compensation that totals about 6.8% of Penton’s shares.

Mr. Kemp said Penton expected its stock to trade at $14 to $15.

He warned that although the industry is reporting consistent growth above inflation and Penton’s stock is trading higher than expected, few media companies with less than $100 million in market capitalization should consider a public offering.

“You have to be a certain size and scope in order to be a successful public company,” he said. “People have to recognize they have to have not only good sizzle, but good meat to their story.”

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