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The Athletic to New York Times Inside Sale

Athletic co-founders Adam Hansman and Alex Mother

Source: Athletic

In September 2020, Athletic announced that it had reached 1 million subscribers. Co-founder Alex Mother talked about what he needed to sell.

“We’re not thinking about exits, and we don’t see the benefits here,” Mother said. “Few companies are doing what we are doing. The New York Times is the tip of a spear and they are growing faster than ever. We know what our ceiling is. I don’t know. Our limit is when Adam and I chat, but we’re not close to chatting. “

By March 2021, six months later, Athletic had begun negotiations to merge with Axios. Two months later, the New York Times began negotiations to buy athletics. This kicked off a broader sales process and increased interest from companies such as Amazon, Conde Nast, DraftKings, and private equity firm TPG Capital, which CNBC learned.

I don’t know exactly why Mother and Hansman changed their minds so quickly, but the company needed a new capital injection. As The Information first reported, athletics spent about $ 100 million between 2019 and 2020, but generated only $ 73 million in revenue over the same period. Athletics have never been profitable.

Athletic considered raising more money, but the cost of raising money and further dilution to the founders and other investors pushed Hansman and Mother to sell.

Still, some investors and advisors close to the company personally urged Mother and Hansman not to sell. Part of this astonishment arose this week when venture capital firm Powerhouse Capital sent a letter to a limited liability company admitting that it didn’t want to sell athletics.

“I believe it’s still worth unlocking the athletic platform, but now it looks like the New York Times is built on that foundation,” Powerhouse was first reported by Axios and confirmed by CNBC. I wrote in the memo.

Below is a description of The Athletic’s sales channels. An athletic spokesman declined to comment.

Sale decision

Athletics have always been focused on sports, but according to those familiar with their ideas, it wasn’t the ultimate plan for Mother and Hansman. In the early days of athletics, consider integrating with Nate Silver’s 538.com, combining sports and politics, and partnering or integrating with American test kitchens to bring food and sports under one roof. I was toying with the idea of ​​putting it together. , The person who asked not to name it because the discussion was private.

In March 2021, Axios approached athletics with the idea of ​​a merger, according to people familiar with the matter. The two new journalism companies praised each other’s work and focused on expanding local coverage.

Axios was a front-line company with athletics folded down, one said. Mother and Hansman were interested in the idea of ​​whether the merged company could be published via the then hot SPAC. However, Axios co-founder and CEO Jim VandeHei was skeptical of the SPAC. Eventually, both sides decided to leave.

As athletic interest in the merger became publicly known, the New York Times urged athletics to buy the company. But when they couldn’t reach an agreement on value, those discussions also broke down. The New York Times provided about $ 500 million, according to people familiar with the matter. Athletic was the last to raise money in January 2020 with a valuation of $ 530 million. Some people close to athletics, such as investors and advisors, felt that the New York Times underestimated the company.

Athletic has decided to set up Liontree, a boutique media M & A bank, to assess potential sales options, while considering alternative financing. One said Lion Tree would be able to give an athletic presentation and find buyers who would like to pay as low as $ 500 million to $ 700 million.

Amazon, Conde Nast, and DraftKings have shown interest, according to people familiar with the matter. Amazon’s interest has partially arisen from recent pushes into broadcast games, including Thursday Night Football, one said. Having a high-traffic sports landing page to promote and analyze your game can be synergistic with live game broadcasts. Amazon, Condé Nast, and DraftKings spokespersons did not respond to requests for comment.

After kicking the tires, those companies never became serious buyers, three people said. People said the TPG, a private equity firm, has made the Times the biggest challenger in buying athletics. The sale to a private equity company was much more difficult to sell to employees who may be concerned about losing their jobs, the two said. A TPG spokesman declined to comment.

The New York Times was initially uninvited to participate in the new auction because the previous negotiations had ended. However, CEO Meredith Levien decided to return to the table. The deal was closed as it became clear that the Times only needed to increase the initial offer by about 10%. Given the company’s strong journalistic reputation and the potentially unattractive terms of raising more capital, Hansman and Mother agreed to sell.

Some people near the company see this sale as a clear success. This is one of the biggest exits in the history of digital media. The two founders founded the company from scratch, turning ideas (national subscription sports journalism products focused on detailed local reporting and analysis) into $ 550 million entities. According to research firm CB Insights, athletics are sold at “10 times the bubbling price / multiple of revenue valuations,” highlighting that they are a good price for companies with annual revenues of less than $ 50 million in 2020.

Supporters will show you how the New York Times, which is clearly familiar with the growing number of digital subscribers, is the best buyer for a sports journalism site that boasts quality journalism. Athletic wants to grow globally, as does the New York Times. Athletic wants a safe home for journalists. Which company is more proud of journalists than the New York Times? Athletic wants to expand into podcasts and digital video, pushing the boundaries of digital formats, and the New York Times has already established itself as a leader in these areas.

On the contrary, trading skeptics talk about how athletics sold their vision short by selling now. Some investors told Mother and Hansman that athletics felt they could be a multi-billion dollar company. It could still be a separately operated entity within The New York Times. But if that happens, it will be the New York Times shareholders who see the increase in value.

The Athletic to New York Times Inside Sale

Source link The Athletic to New York Times Inside Sale

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