All Set to Shake Up Penton Media

Investor Mario Gabelli has reason to fume at Penton Media (PME ), in which he has a 19% stake: The trade-mag publisher and trade-show operator has been losing money--and making no special effort to enhance shareholder value. And its stock plunged from 15.50 in July to 3.38 on Oct. 2, before rebounding along with the market; it's now at 6.75. Penton puts out 62 trade magazines, such as Air Transport World and Internet World; holds 185 trade shows a year; and operates 139 Web sites. All have been badly hurt by the recession and the collapse in ad revenues. In particular, Gabelli is irked at the poison pill management has put in place to thwart a takeover of the debt-ridden company. Gabelli says poison pills undermine the free-market system. In a filing with the Securities & Exchange Commission, Gabelli says that unless the board removes the pill, he will try to do so in a proxy statement at the next shareholder's meeting. Gabelli has sought the support of institutional investors, and some of his supporters say that he may push for the sale of Penton. Gabelli says Penton's assets are worth much more than the current stock price. Penton is worth 12 to 15 in a buyout, says Sven Monberg, special-situations analyst at Starr Securities.

Asa Graves of Wachovia Securities says a "return to more normalized operating levels in 2003 should result in a very attractive valuation at current prices." The analyst says Penton is a lot leaner because of efforts to cut costs and reduce debt. Although the first half of 2002 will be difficult, Penton expects a modest recovery in its businesses in the second half. Graves rates the stock a buy with a 12-month price target of 9, based on 11.9 times his 2002 earnings before interest, interest, taxes, and amortization of $52.7 million. He expects Penton to lose 80 cents a share in 2001 and 61 cents in 2002. Penton declined comment.

By Gene G. Marcial

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