MAIN NEWS HEADLINES
March 8 – March 15, 2007 Edition

AMS Executives
To Earn Extra Incentive
Pay for Company Sale
B&T Offer Challenged?

DELAWARE/3/6/07–Six senior executives of bankrupt American Marketing Services (AMS) apparently will divvy up $765,000 in incentive payments over the next few months as compensation for handling the sale of the company to Baker & Taylor or to another buyer. According to U.S. Bankruptcy Court documents, the executives have asked the court for the incentives plus an additional 1% if the company sells for more than the $76.25 million Baker & Taylor has offered. A bonus of 2% will be paid to the top management if the sale price is more than $2 million higher than the so-called “stalking horse” offer by Baker & Taylor. The matter is still under consideration.

The sale to Baker & Taylor is not yet a done deal, though B&T has publicly said that it plans on closing the deal by mid March. And if the deal is not consummated, AMS must pay substantial penalties to B&T. The current offer from Baker & Taylor excludes $40 million in inventory, which then must be returned to publishers within 20 days after the B&T sale is closed.

AMS has received at least two alternative proposals to acquire all or part of the company. One offer, court documents say, is for AMS receivables, inventory, and foreign subsidiaries as well as the inventory of APG. The APG division repackages and independently publishes various book titles on its own for sale by its warehouse club customers and to independents and chain bookstores. APG creates and or/publishes the rest of its titles through its own imprints, which include Thunder Bay, Laurel Glen, Silver Dolphin, andPortable Press. In yet another (and perhaps less likely) scenario, one prospective buyer may offer to purchase the entire company together with inventory.

PGW, the warehousing and distribution arm for smaller and independent publishers was spun off from the main company in court proceedings and assigned at the end of February to Perseus Books Group, which has obtained agreements from 124 former PGW clients to transfer their accounts to Perseus. PGW distribution will be merged into Perseus’s Jackson, Tenn warehouse, which will be expanded to accommodate an inventory of about 20 million additional books.

An interesting development that could point to the identity of at least one potential buyer centers on Charlie Winton, Avalon Publishing Group CEO. Charlie sold Avalon to Perseus in January. He subsequently bought a major portion of Winton, Shoemaker & Company LLC (WSC), a new investment group that plucked Shoemaker & Hoard’s assets out of Avalon just days before Perseus bought Avalon.

All three companies-Avalon, Perseus, and Shoemaker & Hoard-are distributed by Perseus/PGW. In a February announcement about formation of the new Winton, Shoemaker, partner Jack Shoemaker said he expects to announce “another significant acquisition sometime in the next ninety days” which will enable WSC to expand its presence in the independent publishing arena. Authorlink asked Jack Shoemaker if he would comment further on the acquisition. He declined.

Charlie Winton, in addition to his new investment in Winton, Shoemaker, not only will remain as Avalon’s CEO for the next few months, but will also serve as a consultant to Perseus. Authorlink speculates that Winton, Shoemaker & Company, LLC may be the company that is bidding on all or part of AMS. Perhaps a likely scenario is for WSC to acquire the APG chunk of the business.

The U.S. Bankruptcy Court’s next meeting date for this month is on March 28 at which time a schedule of omnibus hearings will be set. It is unclear when the formal bidding procedure for any alternative bids to the B&T deal will get underway.

Editor’s Note:

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