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This Publisher Gets Rave Reviews

Inside Wall Street


With the book publishing industry currently in a consolidating mode, the pickings have become quite cheap for deep-pocketed giants looking for buyouts. Even the nation's largest publisher of children's books, Western Publishing Group--often rumored to be a target--has become cheap as its stock fell to 15 on June 22 from 23 in December.

"The company was an attractive target a year ago when its stock was flying high, so it's an even better buy at its current price and market cap of just $315 million," says investment manager Jim Awad, who figures the stock is worth 30 in a buyout.

Awad sees earnings jumping to $1.30 a share in 1994 from an estimated 90 this year. "So, as the stock has dropped, earnings have shown signs of rebounding," he notes. Awad suspects this situation has rekindled interest in Western among the same group eyeing the company a year ago, which he believes included Paramount Communications, Time Warner, Walt Disney, and Germany's Tengelmann.

Western, known for its Golden Books trademark, disappointed the Street last year with lower-than-expected earnings, prompting many investors to bail out of the stock.

Analyst John Mahoney of Raymond James & Associates says that with Western's distribution network, the franchise value of its products and licenses, and the expected improved growth rate, "the stock is substantially undervalued." He says Western's franchise and distribution network will be almost impossible to duplicate with its 2,500 book titles, 125,000 retail outlets, and 1.5 billion Golden Books sold in the past 50 years. "The Golden name is perhaps the most widely recognized and valuable franchise in publishing."GENE G. MARCIAL

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