Late today, Judge Christopher Sontchi approved Perseus‘s offer to take over the distribution contracts of all PGW publishing clients that have signed distribution agreements with the company, reports PW Daily. It ends a highly competitive contest between Perseus and the National Book Network for the fate and fortunes PGW clients. “We are excited to move forward as quickly as possible to write checks to PGW clients and to provide some certainty for PGW employees,” said Perseus CEO David Steinberger in a statement. More than 100 publishers, who collectively constitute about 85% of the total amount of monies owed to PGW clients in the AMS bankruptcy, have signed agreements with Perseus. NBN president Jed Lyons said he was “very disappointed” to not have the opportunity to work with the PGW publishers, but congratulated Perseus on its victory.
Posts Tagged ‘David Steinberger’
It took a flurry of late night activity, and Judge Christopher Sontchi could decide to do whatever he likes when today’s hearing gets underway at 11:30 PST, but for now, it looks like Perseus has the upper hand in the battle for Publishers Group West and its client publishers. PW Daily reports that AMS lawyers and the unsecured creditors’ committee gave their support to Perseus’s offer to pay 70 cents of pre-bankruptcy claims to PGW clients. Perseus has signed contracts with publishers accounting for 85% of the PGW debt. Perseus CEO David Steinberger said he was “gratified” for the backing of the two parties and appreciated the support Perseus received from the publishers.
But National Book Network isn’t counting themselves out yet. CEO Jed Lyons announced the company is raising the payout to publishers to 100% of monies owed and dropping NBN’s $1.2 million claim against AMS, as well as another unsecured claim. NBN has agreements with 118 publishers, representing 42% of PGW clients, excluding Avalon, which is being acquired by Perseus.
And the 11:30 hearing will also address distributor Baker & Taylor ‘s plans to take control of the non-PGW-related bankruptcy holdings of AMS. Michael Cader noted in Publishers Lunch yesterday that “doing some reverse math” revealed some interesting findings. “In their January 24 court filing, [AMS] declared accounts receivable of $147.5 million and inventory of $72.5 million. But in the B&T letter of intent, accounts receivable have plunged to $65 million — implying that accounts have paid down their payables by returning up to $82 million worth of books.” That’s a whole lot of money unaccounted for, and it’s not even taking into account how much money Wells Fargo has first claim on. Radio Free PGW has much more on B&T’s offer and why, in his opinion, it’s the “recipe to make stinkbug pie.”
PW Daily reports that today’s 11 o’clock hearing in U.S. Bankruptcy Court in Delaware on the sale of Publishers Group West ended in a postponement until later this week. Judge Christopher Sontchi clarified for publishers that they are entitled to sign agreements with both National Book Network and Perseus. He also granted NBN two more days to produce a definitive agreement, at which point an auction will be held to determine the winner. If they can’t, then Perseus’s offer will be approved on Thursday morning.
“We respect the process and we’re just looking forward to moving forward as quickly as possible,” Perseus CEO David Steinberger told PW Daily. “We’ve always said it’s important for the PGW community to get a decision quickly.” For his part, NBN head Jed Lyons was pleased that the judge had given the company the needed time to complete its documentation. He noted that the judge said that “facially” NBN’s offer appeared to be higher and better.
In other news, the so-called “mystery buyer” for Advanced Marketing Service’s holdings is none other than book distributor Baker & Taylor . The two parties must complete an asset purchase agreement and then file a motion with the bankruptcy court for a hearing to determine if there are other suitors interested in bidding on the company. The parties expect to request a bidding procedures hearing before the bankruptcy court on February 16, and would hope to close a deal by March 15.
It’s a big day in the story of Advanced Marketing Services‘ Chapter 11 bankruptcy, as Judge Christopher Sontchi is set to rule on various motions pertaining to AMS’s future, the competing bids for Publishers Group West by National Book Network and Perseus, and on the most important part of the proceedings: money. Or of course, he may not, if a motion to delay a decision is passed. But to say the industry is waiting on pins and needles for what the judge might decide is, shall we say, a big understatement.
Shelf Awareness has comments from both sides of the PGW bid party. David Steinberger, CEO of Perseus Books Group, said that after “an
extraordinary weekend,” the company has signed up PGW publishers
representing about 85% of PGW revenue, well above the 65% threshold
level set when it made the initial offer a month ago. He noted, too,
that Perseus had changed the offer slightly, “introducing an early exit option” that will be applicable to all publishers that have signed with Perseus regardless of when they signed. “We feel that any further delay in the process would be very unfair to the PGW
publishers and PGW staff who have suffered enough.”
But NBN President Jed Lyons told the online broadsheet that that the
distributor has contracts with more than 70 PGW publishers. “We’re very pleased considering we’ve only being doing this three days. It’s
extraordinary.” He noted that because Perseus is buying Avalon and
because Grove/Atlantic is a strong Perseus supporter, “probably a third of PGW revenues has been off limits for us.” (Speaking of Avalon, Charlie Winton, the company’s president, gets a big write-up in the LA Times as they finally get on the AMS bankruptcy bandwagon.) In addition, Lyons said he had sent PGW publishers a statement from Fortress Investment Group, whose Drawbridge Long Dated Value Advisors of New York is providing financing for the deal.
Radio Free PGW, as always, has the updates and insight, but today’s nugget comes by way of PGW publisher Vicki Lansky: “I have often found that life’s most important decisions/choices are based on incomplete information (marriage, having a family, believing in god, starting a business, figuring out the right distributor). I’m going to let the court make the best guess it can. Too many unknowns. (My guess is that neither would be perfect.) Having a distributor is better than not having one, that is all I know. I think we’re lucky that 2 companies are willing to slug this out over us. We could have no one interested in bailing PGW (and in effect, us) out. I hope however this works out, it works for you.” And that sentiment sure works for us…
When the National Book Network entered the AMS/PGW bankruptcy sweepstakes, we had a feeling things were going to get contentious, and fast. And so it has come to pass, as PW Daily reports that things are heating up with the February 12 court date for judge Christopher Sontchi to rule on the competing offers looms ever closer. To wit: both Perseus (which is claiming a small victory in that it has now received more than the 65% response rate from PGW publishers necessary to bring the offer before the court) and NBN have sent in revised proposals to the PGW Ad Hoc Steering Committee, and at the moment – according to Radio Free PGW – committee is recommending that all PGW publishers sign the NBN offer (after the distributor agreed to a number of the changes in the contract recommended by said committee) and fax it to NBN by Sunday.
PW Daily reports that various Publishers Group West clients are sending back signed agreements to the distributor, though as of this writing, not all publishers have yet received offers. Perseus CEO David Steinberger said he had received “more than 10″ contracts since they began coming in yesterday. Late last week, Steinberger and PGW head Rich Freese met with a group of PGW clients in the San Francisco Bay Area. “The sessions went well. We did a lot of listening,” Steinberger said.
As the runup to the February 7 bankruptcy court hearing date for objections to Perseus’s offer continues, so too do the rumors and speculation. Yesterday PW Daily reported that AMS’s primary lender, Wells Fargo Foothill, “received at least two promising going concern offers for the AMS business,” though the bidders were not named. And both Edward Champion and Radio Free PGW offer items about dealings within Perseus’s distribution chambers.
If our coverage of the AMS bankruptcy of late borders on the skeptical, it may be because we can’t help but be reminded of one scenario in particular: if Perseus does indeed end up the sole distributor of all 150-odd clients of the entity now called Publishers Group West, then Perseus would become the distributor for nearly 300 publishers. “Independent distribution is a tremendously competitive field, with many well-funded conglomerates,” David Steinberger, the company’s CEO, told the Associated Press yesterday. “Our mission is to be the preferred platform.”
Preferred is one thing, but at what price? And is being the only distribution game in town for hundreds of independent publishers a good way to do business, or will the anti-trust dogs have to be called in? Then again, let’s also remember that any deal, no matter how enticing it may seem on the surface, still has to be approved by the Delaware bankruptcy court overseeing the AMS case. And if Christopher Sontchi decides not to give his okay, then it’s back to square one for a great many publishers. Point being, no matter what happens, the news will never be entirely good – it’s really a choice between the lesser of several unsatisfactory options.
But until the deal is approved – or not – we’re left with a lot of tentative possibilities. Avalon is definitely going to Perseus, and Grove/Atlantic is pretty well on its way, too. PW Daily reported yesterday that if the court approves the proposal, PGW will continue to provide distribution services for publishers before ultimately transferring their books and operations to Perseus’s distribution facility in Jackson, Tenn. It is unclear what the long-term role for PGW staff will be in the Perseus operation. And sources also told both PW Daily and Shelf Awareness that Levy Home Entertainment, whose main business is supplying mass market outlets with books, is still working on a bid to acquire AMS’s warehouse club business. That’s because they have opened an office in San Diego and hired on several former AMS staffers, though neither AMS nor Levy confirmed the reports directly to either publication.
When it comes to the Wall Street Journal, I’ve learned not to ask the obligatory “what took so long?” question because they seem to go through about triple the research and vetting standards that most of the major newspapers do in order to file stories. And by delaying on the AMS bankruptcy debacle, they give the story – and the perilous situation for Publishers Group West publishers – new life. Most of Jeff Trachtenberg‘s piece focuses on Perseus‘s plan to pay PGW’s publisher clients 70 cents on the dollar for their claims in exchange for dropping their claims against AMS and sign an extended book-distribution agreement with Perseus. Not only has Avalon, which announced its move to Perseus earlier this month, signed on, but so now has Grove/Atlantic.
“It’s a natural extension of what we’ve been doing the last few years,” said David Steinberger, Perseus’s chief executive. Steinberger said it will cost an estimated $20 million to pay PGW clients for their claims. That money could be paid out in a matter of weeks, if the court approves the deal. But Soft Skull‘s Richard Nash is one publisher who is worried about his prospects for survival in the wake of bankruptcy. That’s because Soft Skull is owed $110,000 by PGW and anticipates big bills as booksellers send back unsold copies from the holiday season. Soft Skull is debited for the wholesale price of each returned book and so far, those returns total $20,000 this month. Nash is also $250,000 in debt, including $40,000 from family members that he considers a personal loan.
If Perseus is successful, it will have an estimated 250 independent book-publishing distribution clients. And that’s where it becomes tricky. Because if every one of PGW’s clients signs on with Perseus, it gives the distribution company a tremendous amount of power. Aside from their in-house imprints, they are also responsible for distributing books under the CDS and Consortium arms, totaling approximately 120 separate publishers. Add in PGW’s approximately 150 publishers and suddenly, the vast majority of independent publishers owe their abilities to get their books into bookstores to a single company. And if the AMS mess has proved one thing, it’s that the perceived autonomy PGW had ended up amounting to very little. Which is why, as Radio Free PGW points out, it’s a good idea to look at those prospective contracts very, very closely.
Publishers Lunch reported late yesterday that the Avalon Publishing Group, which includes Carroll & Graf, Shoemaker & Hoard, Seal Press, Thunder’s Mouth Press, Nation Books, Marlowe & Company and Avalon Travel Publishing, has signed a letter of intent to be acquired by the Perseus Books Group. (AP picked up the story this morning.) Terms were not available, but Avalon is said to have been generating about $32 million annually. Charlie Winton, Avalon’s president (and former PGW founder) will stay in place during a “transition period” and then will serve as a consultant to Perseus, including advising on “how to further develop Perseus’ client services business through which Perseus provides sales and distribution services to independent publishers.”
Since Avalon was one of the most high-profile clients of Publishers Group West, this is big news -and it remains to be seen, as Michael Cader pointed out, what this news means for the rest of PGW’s 150-odd publisher clients. Make what you will of Perseus CEO David Steinberger‘s comments in his statement about the new deal: “Charlie and I are already working together on a proposal to AMS, PGW and PGW clients, all of whom are facing a very challenging situation. We have talked to a number of clients and we are in discussions with AMS.” Winton says, “We think a path can be found that would benefit all parties. Because of its two distribution lines – Consortium and Perseus Distribution – Perseus is ideally positioned to lead this initiative.”
For Winton, the sale to Perseus marks the end of a five-year odyssey with AMS that began in 2002 (and included his replacement as PGW’s head by current CEO Rich Freese in 2003.) And as Pat Holt (of Holt Uncensored fame) predicted back when AMS bought PGW, “this marriage between distributors with conflicting philosophies is going to hit some purty stormy patches.” Did it ever – and Winton’s necessary defection may well signal even more defections, whether to Perseus or to different distribution waters. This morning, the anonymous Radio Free PGW blog added its own take on the story with a part history, part obituary of PGW as it once was.