Zuckerman Drops 'BusinessWeek' Bid, Zelnick Partners with Thomson-Reuters

Mort Zuckerman, the owner of the New York Daily News, is dropping out of the bidding for BusinessWeek along with OpenGate Capital, a private-equity firm which made a separate bid for the title. This leaves two competitors: Bloomberg LP, the financial information empire, and Zelnick Media, another private-equity firm.

While Bloomberg is considered the likely winner, Zelnick Media has bolstered its chances by partnering with Thomson-Reuters, according to several reports Wednesday.

The news that Zuckerman has withdrawn is a bit surprising, considering that he only joined the auction last week, several weeks after the deadline for bids had passed -- creating the impression that he had an especially compelling offer.

Although he has not disclosed the nature of his offer or his reasons for withdrawing, people involved with the deal told Reuters that he may have been discouraged by McGraw-Hill's preference for a sale to Bloomberg. OpenGate may have dropped out for the same reason.

OpenGate was at an extra disadvantage because McGraw-Hill would like to sell the magazine to another publisher rather than a private-equity firm, industry insiders speculate. A publisher would be less likely to gut the distressed title to achieve short-term profitability.

For the same reason, Zelnick Media -- which has bought a number of distressed media properties -- is partnering with Thomson-Reuters, another financial information colossus with size and prestige to match Bloomberg.

Thomson-Reuters earlier declined to bid on BusinessWeek, but was won over by Zelnick's proposition -- which probably leaves the matter of funding to the private-equity firm, while leveraging Thomson-Reuters' reputation as a respected publisher to set McGraw-Hill at ease about the magazine's future.

However, Zelnick and Thomson-Reuters face very determined opposition from Bloomberg, which by all accounts remains the frontrunner in the auction. While BusinessWeek's financial woes are well-known, the magazine would still give whoever owns it access to a large audience of business professionals who might not subscribe to paid business information services.

This plan for increasing content exposure with consumer audiences is also evident in Bloomberg's unveiling last week of a new newswire service in partnership with The Washington Post. The new joint news service -- which will go by the clear, if ungainly, moniker The Washington Post News Service with Bloomberg News -- is scheduled to go live on Jan. 1, and will post about 120 stories per day.

Per the terms of this deal, the Post can tap into Bloomberg's pool of 300,000 demographically desirable subscribers, while Bloomberg's content will reach roughly 1 million subscribers to the newspaper's print edition, and an even larger number of online readers. The Washington Post claims its Web site attracts 8 million unique visitors per month, 80% of them outside the Washington metro area.

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