PGW Clients Weigh Perseus Offer

This week, Perseus Books Group and Advanced Marketing Services (AMS) announced that Perseus and AMS subsidiary Publishers Group West (PGW) had reached an agreement under which Perseus would acquire "substantially all" of the distribution contracts of PGW. Perseus' plan is to pay PGW's clients 70 percent of the money owed to them unless their sales for the last quarter are out of line with the previous three quarters. In addition, Perseus is asking publishers to agree to a contract of approximately four years.

Based on the wording of the proposed agreement, at least one smaller PGW client questioned whether his company would actually recoup 70 percent of monies owed. Richard Nash, publisher of Soft Skull Press, told BTW via e-mail that the language in the legal agreement regarding publisher compensation is unclear. The agreement notes that in the case of "publishers representing the remaining 35 percent of the Maximum Pre-petition Claims, Perseus Books may (but is not required to) pay such Consenting Publishers less than 70 percent of their Pre-petition Claims."

"It is true that the contract gives Perseus the right to offer less than 70 percent," said Perseus President and CEO David Steinberger via e-mail, "but Perseus has made the decision not to exercise that right except in the cases of publishers whose fourth-quarter sales are disproportionate to their ongoing publishing program."

Eli Horowitz, managing editor and publisher of McSweeney's, told BTW he believes the Perseus offer looks to be the best way out of a tough situation. "The question now is whether Perseus can bring along the culture and expertise that attracted all these publishers to PGW in the first place," he said.

In addition to paying PGW clients part of the debt owed to them for the last quarter, under terms of the agreement, PGW will assign its publisher client contracts to the Perseus Books Group, to be performed by its distribution subsidiary. The Perseus Books Group will pay PGW's operating costs for a five-month transition period following closing, during which PGW will continue providing distribution services for the participating publishers before ultimately transferring their books and all operations to the Perseus distribution facility in Jackson, Tennessee.

Over the transition period, Perseus, with input from PGW executives, will establish the infrastructure to serve PGW publisher clients for the long term, utilizing staff from both the Perseus Books Group and PGW, according to a Perseus press release. Two larger PGW clients, Grove/Atlantic and the Avalon Publishing Group, have already signed agreements with the Perseus Books Group to have their contracts assigned to Perseus.

"We are moving quickly to provide a solution for PGW's clients, providing the funds that they need to keep operating so that can they can focus on publishing books," Steinberger said in a statement. "We admire PGW's organization and the PGW team. Our high regard for them will be a key factor in our planning as we move forward."

Soft Skull's Nash wonders if Perseus can handle the additional volume. "Only PGW possesses the human infrastructure capable of handling all these publishers," he said, adding, "given the four- to six-year term being required, we will have no ability to use the threat of going somewhere else, in order to achieve an appropriate level of service." --David Grogan