NEW YORK -- Leveraged buyout firm Forstmann Little & Co. will buy the Ziff-Davis Publishing Co., the largest U.S. computer magazine publisher, for $1.4 billion in cash.
Sealed bids were due last night, but Forstmann Little made an offer a few days ago, essentially telling Ziff-Davis to take it or leave it.
Sources said other companies that had closely examined the publishing arm of Ziff Communications and might have bid were Reed Elsevier PLC, a British-Dutch publisher; German publisher Bertelsmann AG; Japanese software distributor Softbank Corp.; and K-III Communications, owned by Kohlberg Kravis Roberts, also a leveraged buyout firm and Forstmann's chief rival.
This marks the second sale of Ziff-Davis magazines in a decade. TTC In 1984, when company Chairman William Ziff Jr. was diagnosed with cancer, he sold 12 consumer magazines, including Car and Driver, to CBS for $362 million, and sold 12 trade publications to News Corp. for $350 million. Mr. Ziff smartly held on to PC Magazine and a few other computing titles and after he beat his illness, he rebuilt the company into an even more valuable enterprise.
Mr. Ziff retired a year ago and named Eric Hippeau chairman and chief executive of Ziff Communications.
In June, the Ziff family put the company up for sale because Mr. Ziff's three sons wanted to concentrate on investing in securities and real estate.
Three other parts of Ziff Communications, which has annual revenues of $1 billion and includes the Interchange Network Co., a new on-line service, are still to be sold. A source said they are expected to be sold for more than $2 billion, greater than what the family expected.
The publishing division, led by PC Magazine, with circulation of more than 1 million, sold for more than 10 times its cash flow, a source said. The division, with 3,300 employees, includes 11 magazines, newspapers, books, CD-ROMs and the ZiffNet on-line service.
Ziff-Davis will continue to be based in Manhattan and will be run by Mr. Hippeau. No changes are planned in the editorial direction or work force.
Forstmann Little will invest $900 million from its own capital, which is drawn from investments from large pension funds, and borrow the balance. Senior partner Theodore J. Forstmann said Thursday, "We're looking to own this for a long time and build a lot bigger company."