Done Deals – Madison Dearborn Invests in AgWeb –

In its latest Internet deal, Madison Dearborn Partners bought the farm and still managed to come out looking like a buyout firm in the process. The firm, in a partnership with Safeguard Scientifics Inc. and Farm Journal Inc., have teamed up to form AgWeb.com Inc., a Web site for farmers.

Madison Dearborn managing director Ben Chereskin said the Chicago, Ill.-based firm’s total contribution to the new site was $15 million. He declined to comment on Safeguard’s contribution to the site.

AgWeb.com, which will provide news, weather, commodities prices, editorial content, product information and educational material, is Madison Dearborn’s latest investment in the Web-based business-to-business space. With $100 million in cash and assets, the site launched Jan. 31.

In return for its investment, Chereskin said the firm and Safeguard will own AgWeb.com assets including rights to Farm Journal’s subscriber database, marketing database, satellite paid customer subscriptions, electronic rights and 40 executives. Although it contributed no funding, Philadelphia-based Farm Journal will hold a minority interest in the Web site.

“It would be difficult for a born-on-the-Web company to replicate the credibility, data and industry relationships that AgWeb.com will be able to as a result of what it is inheriting from Farm Journal,” Chereskin said.

Chereskin said AgWeb.com will employ a strategy of internal growth, partnering and acquisitions. Potential acquisitions would be sources of content, including existing agriculture business Web sites.

Assets Lure Capital

Chereskin said a Web venture like AgWeb.com is an excellent Internet strategy for buyout firms to pursue. “This is a business in which we have a more natural position given it already has assets,” he said.

Revenue is already being generated by pre-existing Farm Journal businesses, including direct marketing services, paid content, and satellite delivery subscriber fees.

“The revenue model will be expanded to include a variety of advertising and store-front related capabilities,” Chereskin said. “In the next few months we will increase revenues with the introduction of exchange, auction and market-making capabilities.”

A heavy marketing budget has been allotted for the site. Chereskin declined to disclose an exact figure, but said marketing for AgWeb will be one of largest campaigns ever in the agricultural sector.

Farm Journal’s periodicals, newsletters, direct marketing, television, radio and conferences are expected to drive traffic to the new site. Farm Journal magazine, the company’s flagship publication, has a circulation of 600,000 subscribers.

Roger Randall, president of Farm Journal, will serve as chief executive of AgWeb.com.

Chereskin will represent Madison Dearborn on the board. Mike Forgash and Dan Mckinney from Safeguard will also serve on the six-member board.

Madison Dearborn has experience in the Internet business-to-business space. The firm owns Band-X, a market exchange for telecom capacity where carriers can exchange capacity on various routes. Madison Dearborn also owns Paperexchange.com, a site used by the paper industry.

In December Madison Dearborn contributed to a $40 million equity round led by Fenway Partners and executives at Kohlberg Kravis Roberts for SupplierMarket.com, a Web-based business-to-business market for manufacturers (BUYOUTS, Dec. 6, 1999, p. 1).