Why Did He Buy New York? Hey, Wasserstein Loves Deals

Correction Appended

Those who worried that the recent tussle among billionaires for control of New York magazine would leave the storied publication as a personal platform for the winning mogul's social and business agenda might be able to relax. The interests of Bruce Wasserstein, the Wall Street deal maker and the magazine's new owner, appear far more academic than busying himself with the publication's journalism. Almost oddly so.

''I like strategy,'' he said numerous times during a 40-minute interview yesterday in which he was maddeningly vague about his reasons for buying New York for $55 million and his plans to turn around the financially struggling magazine. ''That happens to be my particular strength and what I do for a living, but it's also what I enjoy doing.''

Mr. Wasserstein, 55, who in his day job is chairman of the private investment firm Lazard, avoided any talk of editorial changes or bold marketing initiatives at New York, the 35-year-old publications that through its mix of vivid storytelling and service journalism became a model for the modern city magazine.

Instead, Mr. Wasserstein -- who as one of the highflying investment bankers of the last two decades is a transactions geek if there ever was one -- spent time analyzing how he bested the competition in the auction for the magazine, and explaining in wonky detail how his team's better understanding of Primedia's needs made its victory a foregone conclusion.

Both current and former employees of his other media properties, including The American Lawyer and The Deal, a publication covering the mergers marketplace, confirmed that Mr. Wasserstein had rarely meddled, and when he did suggest specific articles, there did not appear to be any hidden agendas. But his qualities as a deal maker and absentee landlord do not ensure that Mr. Wasserstein has any special touch for running media properties.

American Lawyer and its affiliated legal publications have maintained their reputation for journalistic seriousness, but as a business, the performance has been underwhelming. And The Deal, which Mr. Wasserstein conjured in 1999 to cover mergers and transactions, has been a broken play from the beginning, leaking tens of millions of dollars as it backtracked from a daily to a weekly.

Nonetheless, Mr. Wasserstein has not lost his lust for media properties, as the acquisition of New York demonstrates. And he is not in that business for the money. As a founder of the boutique investment firm Wasserstein Perella & Company, he engineered deals like Texaco's acquisition of Getty Oil before selling the company to Dresdner Bank of Germany for $1.37 billion in 2000, pocketing more than $600 million.

While he is not one for conspicuousness -- he refers to his sister, the writer Wendy Wasserstein, as ''the famous one in the family,'' his primary fashion accessory is a cellphone and he forsakes being seen at the Four Seasons restaurant for lunch on the go -- there is still an element of ego in his purchase of New York.

''I think that Bruce was surprised by how little cachet there has been in owning American Lawyer and The Deal,'' said one friend. ''This purchase should fix that.''

Mark M. Edmiston of AdMedia Partners, a media investment bank, said, ''Obviously, the price of the magazine is not justified by the facts.'' The magazine, which in the mid-1990's made about $8 million a year in profit, made about $1 million in profit last year on revenue of about $43 million.

''This is a crown jewel,'' said Scott P. Peters, managing director at the Jordan Edmiston Group, a media investment firm. ''This is a publishing pet project and if you are from New York and plugged into the scene, this acquisition provides a lifestyle fringe benefit that others don't.''

Mr. Wasserstein said righting New York magazine was a straightforward, if difficult, challenge. ''At best, the magazine is the embodiment of New York, a very exciting city,'' he said. ''All you have to do is be a good mirror of this city.''

He was short on specifics on how to hold up that mirror, beyond saying he wanted to improve the business coverage of the magazine and create more spinoffs aimed at the upscale readers, as he has done at American Lawyer Media. Although he served as an editor of his college paper, Mr. Wasserstein does not lay claim to the literary gene of his sister, suggesting jokingly that his book, ''Big Deal: Mergers and Acquisitions in the Digital Age'' (Warner Business; September 2001), was most effective as a sleeping aid.

Given that Mr. Wasserstein paid a hefty premium for New York, some lessons from his book ring close to home. He hypothesized that in some buyouts, ''pride or ego causes managers to launch overpriced transactions and pay steep (and unwarranted) premiums for target companies.''

Although people who know him were surprised by his ability to quietly swoop in at the end of a very public auction and take the prize off the table, they say it makes sense in retrospect.

''My reaction when he bought it was exactly the same as when he bought my former company,'' said Steven Brill, the founder of American Lawyer. ''I knew that he would not embarrass himself by sleazing it up or getting involved in editorial. He has sacred cows like everyone else, but I don't think he would ever risk involving himself.''

''His favorite business thing is the strategic and tactical element,'' Stephen A. Schwarzman, chairman and president of the Blackstone Group, said. ''He's sort of a chess player. He runs all the alternatives constantly.''

Mr. Wasserstein suggested that his investment in New York as well as in his other media properties would eventually pay off. But the rearview mirror on his existing media holdings does not reflect a very pretty history.

American Lawyer Media's collection of 29 legal newspapers and magazines around the country had an operating loss of $13.4 million on revenue of $133 million in 2002, down from $155 million in revenue in 2000. As business publications, they are to some degree imprisoned by the business cycle. And the properties are operating with debt that is 10 times earnings before interest, taxes, depreciation, amortization and other charges, a high level of debt.

''The company is highly leveraged and is able to service its cash interest requirements with its current level of profitability,'' said Hal Diamond of Standard & Poor's. ''However, contractual cash interest payments are required on the holding company senior discount notes, beginning in June of 2005.''

Mr. Diamond said that the $10 million interest payments would place a heavy burden on the company, but pointed out that those notes had been bought by Mr. Wasserstein, who might be in a forgiving mood if the company continued to limp. It is, of course, all part of a broader strategy.

But not all of Mr. Wasserstein's strategies look so good in the rearview mirror.

While The Deal has been a successful journalistic endeavor, it has not worked out as well as a business. The publication was started in 1999, just as the merger market was at its peak.

Beyond trying to improve his media properties' bottom lines, he has his hands full at his day job. Since joining Lazard, which was beset by chronic infighting and defections, he has tried to remake the firm into what some Wall Street denizens say looks a lot like his old firm, Wasserstein Perella & Company.

While other banks have been reducing staff, Mr. Wasserstein has been on an expensive hiring binge, attracting four of the eight senior bankers who followed him when he defected from First Boston to Wasserstein Perella in the late 1980's. Because Lazard is a private firm, it is hard to determine how successful it is financially, but it appears that the firm is turning itself around. It is advising on some of the most prominent restructurings including WorldCom and now Hollinger International. And though its costs have increased, the bank should benefit as merger and acquisition activity continues to increase.

''We have a clean deck,'' Mr. Wasserstein said of his efforts to restructure Lazard.

While he was always well known as a master strategist, some detractors have taken to calling him ''Bid Em Up Bruce.'' While the moniker was originally a positive reference to his ability to make buyers pay more in an auction, his critics have used it as a derogatory term to describe the way he pushed his own clients to raise their bids to inflate his fees.

But in the case of New York, Mr. Wasserstein thinks he got something of a bargain, although he added, ''I could live without the name.''

Correction: December 20, 2003, Saturday An article in Business Day on Thursday about Bruce Wasserstein, the Wall Street deal maker who bought New York magazine, referred incorrectly to one of his other publications, The Deal. While it has a flagship weekly issue, it still publishes a smaller daily version. It has not ceased daily publication.