Family-run Waverly put up for sale Longtime publisher seeks larger partner to stay competitive

'We lack the resources'

Chief says company plans investments in online technology


November 06, 1997|By Mark Ribbing | Mark Ribbing,SUN STAFF

Waverly Inc., one of Baltimore's oldest remaining family-controlled companies, announced yesterday morning that it is putting itself up for sale. Officials of the 107-year-old medical and scientific publisher said a sale is necessary if the company is to thrive in an increasingly competitive international publishing market.

A trio of high-ranking Waverly officials made the announcement at a morning news conference at the Center Club downtown. They declined to name potential buyers or estimate a purchase price.

But Wall Street clearly thought the company was valued at more than what its stock has been trading for. News of the decision to sell sent its share price up more than 46 percent to $40.125, from $27.375.

The company, founded in 1890, employs more than 400 at its headquarters in the B&O Warehouse at Camden Yards. It is the owner of the Williams and Wilkins publishing label, which produces academic and technical texts worldwide. Waverly sold its printing operations to Cadmus Communications Corp. in 1993.

Waverly hired the investment banking firm Morgan Stanley & Co. to line up potential buyers. The officials said a buyer would likely be announced around Feb. 1.

Waverly is coming off an unimpressive quarter. Earnings for the third quarter were down 44 percent from the same period last year, while revenues were off by 3 percent. Nonetheless, Chairman William M. Passano Jr. put a brave face on yesterday's announcement.

"We're not doing this from a position of weakness," he said. We're doing this simply because we're in a marketplace where size is of great importance. Over time, if we hadn't done something along these lines, we would have faced problems over the long haul."

The Waverly officials also insisted that any sale would not weaken the company's presence in Baltimore.

"My family has been committed to Baltimore for a long time. We feel very strongly that we want a buyer who is committed to staying in Baltimore," Passano said. "We have a 10-year lease in Camden Yards and we anticipate that we'll be there through the end."

Passano said the decision to sell derived not from a single negative event, but from "an evolutionary process" in which Waverly's fragile market position became clear. For example, he said, Waverly had given some thought to purchasing other publishers such as Little, Brown, but backed away when it became clear that Waverly was out of its league.

"We were too big to be niche players and too small to be competitive in the long run with the big boys," he said.

"We're well-capitalized for our size, but when we go up against these big companies, that's pretty small change," Passano said.

In addition, Waverly realized that it was unable to swim alone against the twin tides of technological change and internationalization, the executives said.

"In order for us to maintain our profit base, we're going to have to go into online publishing. You're talking about investments that are much more like gambles. There are no guarantees," Chief Executive Officer Edward B. Hutton Jr. said.

The third Waverly executive at the press conference, Vice President and Secretary E. Magruder Passano Jr., said, "We hold valuable assets, but we lack the resources to hit the global marketplace full-force."

Waverly is hardly alone among medical publishers in struggling with these problems. The company's decision to seek a large buyer represents another chapter in a long phase of industry consolidation.

Other similarly situated medical publishers have been snapped up by bigger, more diversified companies. J. B Lippincott Co. was taken over by the Dutch corporation Wolters Kluwer N.V., while Mosby-Year Book Inc. now is a subsidiary of the Times Mirror Co., parent of The Sun.

"My guess is that the impetus for Waverly deciding to sell is the consolidation happening all around them," said Lanny Baker, an industry analyst for Salomon Brothers in San Francisco.

Baker said the expense of delivering online information has compelled publishers to merge in order to spread out costs: "The game is to amortize costs over as much content and as many users as you can. Waverly doesn't have to become part of a bigger company, but it'll make their business tougher going if they're not."

Company officials expressed optimism about Waverly's ability to attract a quality suitor. Analysts said this confidence has merit, given the perceived quality of Waverly's publications and its increasingly unique position as a relatively small, independently held publisher.

William Passano said he thought the time was ripe for a sale.

"You don't want to wait until you become weak and start to slip away," Passano said.

He also expressed confidence that a sale would not lead to significant job reductions.

"There will be people that lose jobs. We expect that over time there will be more jobs. Clearly, there will be a reorganization that takes place," he said.

The city government shared the upbeat tone. Through a spokesman, Mayor Kurt L. Schmoke said he believed "this sale would lead to a strengthened presence in Baltimore" for Waverly.

In spite of this optimism, the company officials acknowledged that an era was about to end.

"Waverly is being sold. It's not a merger of equals. The company acquiring Waverly will be considerably larger. If it's not consid- erably larger, that won't accomplish our goals," William Passano said.

Davis, the Salomon analyst, said possible buyers include Harcourt General Inc., Reed Elsevier PLC, the McGraw-Hill Cos. and Thomson Corp. None of these companies responded to requests for comment yesterday.

Publishing analyst J. Kendrick Noble of Noble Consultants in Corpus Christie, Texas, questioned the necessity of Waverly putting itself up for sale.

"I thought they could probably survive, especially given their close connections to professional associations," he said.

Pub Date: 11/06/97

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