Willis Stein Closes One, Inks Two More Deals –

Good things came in threes this month for Chicago-based Willis Stein & Partners as the firm closed one deal and inked two more in transactions that together will total approximately $1.1 billion at the end of the day.

The investments include Ziff-Davis Publishing, a technology magazine publisher; Protocol Communications, a provider of customer services; and the community bank outsourcing business of Plano, Texas-based EDS.

The largest of the three deals involves the firm’s agreement to acquire Ziff-Davis Publishing from media giant Ziff-Davis for $780 million. Should the transaction close, Willis Stein will lead an equity commitment of approximately $350 million along with DLJ Merchant Banking Partners. Avy Stein, managing partner at Willis Stein, said his firm is reviewing proposals from three banks for debt financing, but a decision has yet to be made.

Ziff-Davis Publishing is the largest computing and Internet magazine publisher and the sixth-largest magazine publisher in the U.S. Stein said Ziff-Davis is a first-class publishing platform because people want to read about and understand technology, a trend that, he said will continue the growth of the Ziff-Davis publications.

Magazines included in the acquired unit include PC Magazine, PC Computing, Interactive Week and Yahoo! Internet Life. Ziff-Davis will retain Computer Shopper and its ownership interest in Red Herring.

Stein said his firm will look for add-on acquisitions of complementary magazines and possibly could start new publications in response to special interests within the technology sector. Willis Stein plans to help the company increase its advertising sales and create ancillary businesses, as it did with Petersen Publishing, he added.

Willis Stein earlier this year completed its two-and-a-half-year turnaround of Petersen Publishing, a special-interest magazine publisher. The firm acquired the company in September 1996 for $465 million, completed an initial public offering a year later and sold it to Emap Plc for $1.5 billion in January. During that time, Willis Stein increased Petersen’s number of titles to 160 from 76.

The Ziff-Davis acquisition marks the firm’s fifth partnership with media executive James Dunning, who will become chairman and chief executive of Ziff-Davis Publishing. He was part of the investment group that acquired Petersen in 1996 and most recently, assisted in the formation of Willis Stein’s magazine subscription company, USApubs.com (BUYOUTS Aug. 2, p. 8). He was executive vice president of Ziff Communications, the predecessor company to Ziff-Davis, from 1984 to 1986.

Ziff-Davis’ sale of its publishing unit is one in a series of sell-offs of the company’s divisions. Since July, it has sold its ZD Market Intelligence unit, its ZD Education unit and a 64% stake in its ZDTV cable channel.

From Publishing to Protocol

Separately, Willis Stein this month acquired a majority stake in Protocol Communications in a deal that totals approximately $225 million. Willis Stein will contribute approximately $60 million in equity while another $40 million will come from BCI Partners and ING Barings’ U.S. merchant banking group. Canadian Imperial Bank of Commerce will lead $125 million in debt financing for the deal.

Boston-based Protocol Communications provides customer service and marketing services for new businesses that do not yet have these divisions. The company provides its services through several different outlets, but Stein said Protocol is the farthest along in its sector for providing customer service outsourcing over the Internet.

Protocol Communications’ services include strategic market planning, pre-sales customer support, customer sales data and market surveys conducted out of 12 centers throughout the U.S. It serves customers in the retail, business-to-business, non-profit and government sectors. The company employs more than 3,000 people and anticipates 1999 revenue to exceed $88 million.

Testing the waters down South, Willis Stein agreed to buy Plano, Texas-based EDS’s community bank outsourcing business for a reported $140 million.

EDS has decided to spin off the data processing segment of the community banking business because it is no longer a part of the company’s core growth strategy, said Coley Clark, senior vice president of EDS, in a statement.

Stein said he sees a need for the outsourcing services this company provides, adding it has good fundamentals and solid management. The firm plans to build upon what the company already has, he said, including its 500 customers.

Willis Stein has experience in running office processing firms from its ownership of Advantage Business Services, which is the fifth largest payroll processor in the U.S.

Willis Stein is investing from its $840 million Willis Stein & Partners II, L.P. fund that closed in May.