Gay Media Firms to Combine

San Francisco-based PlanetOut Inc. said Wednesday that it would acquire the Los Angeles-based publisher of the Advocate and Out magazines for $24 million in cash, combining the nation’s two largest gay-oriented media companies.

PlanetOut said it also would assume $7 million in debt owed by LPI Media Inc., whose four magazines have a combined circulation of 8.2 million. Privately held LPI, which also publishes books, has 123 employees and about $30 million in annual sales.

PlanetOut, with 152 employees, operates websites that offer dating, travel, shopping and other services. The websites, which include PlanetOut.com, Gay.com and Kleptomaniac.com, offer advertisers the most extensive network of gay and lesbian people in the world, said Chairman and Chief Executive Lowell Selvin.

The deal “combines the massive online reach that PlanetOut can deliver with the amazing content and editorial that LPI Media can deliver,” he said.

Richard Fetyko, a senior vice president with investment bank Merriman Curhan Ford & Co., said the combination would help both the magazines and the websites reach more consumers and advertisers.

“It effectively makes it the largest media company within the lesbian, gay, bisexual and transgender” communities, he said.

“Audience reach is everything,” he added. “If you can double your advertising reach, you can triple your revenue. This is what this acquisition will accomplish.”

PlanetOut, which went public last year, announced the deal after the close of regular stock trading, in which its shares gained 40 cents to $7.51. In late trading, the stock declined 30 cents, or 4%, to $7.21.

Before Wednesday, the company’s shares had declined 48% since the start of this year.

PlanetOut on Wednesday reported third-quarter earnings of $841,000, or 5 cents a share, contrasted with a loss of $29,000, or 25 cents, for the like quarter in 2004. Revenue was $7.6 million, up 20% from $6.3 million.

Selvin said the acquisition should allow PlanetOut to double its revenue, which was $25 million last year. One gay advocate said the deal would mean fewer independent venues for gay and lesbian viewpoints.

“The media is not just a business, but it’s the nerve system through which our political discussions take place,” said Bill Dobbs, an attorney in New York. “When fewer people control that nerve system, it’s bad for a minority community that has fewer outlets to begin with.”