Once-sleepy publishing company is taking risks - and growing worldwide


July 15, 1991|By Blair S. Walker

Edward B. Hutton Jr. wends his way through a gray maze of office partitions, turns into a hallway and strolls straight into an ambush.

An enthusiastic subordinate blocks his path to breathlessly deliver some news: A business associate of Mr. Hutton's has phoned with a hot idea for a joint publishing venture on aging and Alzheimers.

Welcome to the world of Waverly Inc.

A Baltimore-based, closely held firm that maintains a low local profile, Waverly has a lofty reputation in the field of medical and scientific publishing and printing. For years it was a company that, although profitable, looked and acted like an overgrown mom-and-pop operation. But now, Waverly has begun to branch out in a major way, dramatically shedding its old image in the process.

Under the direction of Chief Executive Officer Mr. Hutton, 45, and Chairman William M. Passano Jr., 62, Waverly recently embarked on a buying spree that snapped up three small, highly regarded medical book publishers within a year. That, along with joint ventures in Australia, Japan, Argentina and Hong Kong, have opened up an international market and have further solidified its ranking as one of the top four U.S. companies in the business.

The publishing and printing firm's aggressive new approach stems in part from an infusion of new blood: Mr. Hutton's ascension to CEO earlier this year marked the first time since 1898 that a member of Mr. Passano's family hasn't been at the company's helm.

Positioning the company for the future has brought some short-term problems, including $17 million in debt, a drop in the company's stock price and additional pressures for staffers grappling with increased responsibilities.

And while Waverly's top two executives predict annual revenues will grow from about $130 million to $500 million in the next 10 years, they're concerned that the company doesn't get a case of corporate indigestion from gobbling up its three competitors.

That goal, coupled with the chore of managing Waverly's international joint ventures, is keeping the executives on their toes -- and piling up frequent flier miles.

"We're on schedule financially and operationally with where we wanted to be -- not to say we haven't had a few bumps along the way -- of course we have," Mr. Hutton said. "But we haven't had any major surprises . . ."

After pursuing only a handful of mergers for the better part of 100 years, Waverly spent $26 million in cash and stock to purchase:

* Lea & Febiger L.P., the nation's oldest publisher. Founded in 1785 and known for its titles in medicine and related sciences, Philadelphia-based Lea & Febiger publishes the well-known U.S. edition of Gray's Anatomy. The acquisition was consummated in January in a cash and stock deal worth about $7.5 million.

* Urban & Schwarzenberg, a publisher of medical, dental and allied health books and journals. The company, founded in Vienna in 1866 and now headquartered in Munich, is regarded as one of the more successful publishing houses of its type in Europe. Waverly bought it in 1990 in a cash and stock deal valued at roughly $10 million.

* Harwal Publishing Co., a company based in Media, Pa., and maker of the National Medical Series of review books for medical students. Waverly paid John Wiley and Sons Inc. $8 million in cash for that purchase, which also occurred last year.

After its flurry of expansion-related activity, Waverly is content to rest for the time being, Mr. Hutton and Mr. Passano say.

"If we could always have our druthers and do things exactly as planned and as desired, we would not do any acquisitions for the next two years," Mr. Hutton said, speaking in a conference room at the company's headquarters at 428 E. Preston St. "But of course we don't control when certain publishing properties might come up for sale that would be ideal fits with our strategic agenda."

"Any acquisition we would make in the future would have to fit a very precise, strategic opportunity for our company," Mr. Passano chimed in. "The German one was a very good niche. It opened up all of Europe -- the Berlin Wall came down right after we bought it. You've got the [European] Common Market that's opening up. It was very strategic."

The purchases have affected Waverly -- which prides itself in paying its bills on time and with cash -- in a number of ways. One example has been the addition of $17 million worth of debt to the company's previously debt-free books. That brought long-term debt as a percentage of equity to about 30 percent.

Although Waverly's revenue exceeded $33 million for the first quarter of 1991, a 31 percent increase over a year earlier, earnings per share were 14 cents, a 48 percent drop. That's due to the fact Waverly is funneling profits toward debt service -- a move that doesn't bode well for stockholders in the short-term.

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