Quadrangle Looks At Publishing –

In a vote of confidence for the continued production of feel-good news within the scandal-obsessed mainstream media, Publishing Group of America last Tuesday held a final close on its second round of venture capital financing. The Franklin, Tenn.-based company, which produces five regional versions of a weekly insert magazine named American Profile, netted $23 million in what is expected to be its final dip into the private equity pond.

“We got slightly more than we went out for but, with the current market, we figured it’s not a bad idea to get a little more than you think you need,” said Dan Hammond, president and chief executive with Publishing Group of America.

Quadrangle Capital Partners, the media- and communications-focused private equity firm founded last March by a quartet of former Lazard Freres & Co. directors, led the deal with a commitment of just over $17 million. It was the only new investor to participate on the deal, per its request.

“It was a precondition of the deal that if [Quadrangle] was going to participate, it would have to basically do it all,” said a source familiar with the transaction. “Publishing Group of America could have sold the deal to 10 different firms, but that would have taken much more time and caused a lot of headaches.”

Quadrangle, which is still in the midst of raising its inaugural investment vehicle, is typically considered to be a buyout shop, but this most recent investment is said to be considered growth capital.

The only other institutional investor involved on the deal was Boston-based Megunticook Management, which had participated in the company’s two-pronged Series A deal. That transaction totaled $7.78 million, with the first $2.78 million being sold off in September of 1999, and the remaining $5 million going the following April.

Good News Week-By-Week

That second tranche coincided with the official launch of American Profile, a four-color weekly magazine with regional editorial content placed as an insert within various community newspapers. It is similar to a Parade or USA Today Weekend in terms of general format, except that it produces five regional versions and studiously avoids urban markets.

“The crux of our success is that we’re serving a market that hasn’t been served before,” Hammond said. “Local newspapers penetrate over 70% of the communities which they serve, and we’re the only four-color national supplement for them.”

He added that the publication’s editorial platform only discusses the “good news about hometown America.” There is no intention to either provoke or discuss controversial subject matter.

American Profile launched with a 1.5 million circulation and, one year later, now serves up approximately 3 million issues per week. Target projections call for 15 million readers by the end of 2004, with profitability expected to be reached by the end of Q2 2002.

As for revenue, the company receives fees from the local newspaper publishers and from regional and national advertisers. Because its advertiser base mostly consists of food producers, household product makers and entertainment companies, its ad revenue has not experienced the spectacular spirals experienced by other sectors of the print media.