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Forbes Media Explores Sale

Said to be seeking $400-$500m

Forbes Media LLC is exploring a sale of the 96-year-old media company. CEO Mike Perlis announced the news in a memo to employees today saying that as a result of the company having its best financial performance in six years, the company has gotten “more than a few” indications of interest. Deutsche Bank is handling the process.

Forbes joins other traditional publishing companies that have put themselves on the market in recent years, including Maxim and Businessweek, as they struggle with declining print revenue amid growing online competition. Started in 1917 by B.C. Forbes, Forbes Media has gone through its share of turmoil; in 2006, the Forbes family owners brought in private equity firm Elevation Partners as a minority partner.

Since then, as rival Fortune revealed in a 2011 article, Forbes defaulted on a $90 million credit line and was forced to sell off family assets, including a private island in Fiji and palace in Tangier, to satisfy its lenders. The company made a dramatic leadership shift in 2010 when it replaced CEO Steve Forbes with Mike Perlis, the first non-family member to hold the post. The appointment of Perlis, with his experience at venture capital firm SoftBank Capital, spurred speculation that the company was making itself open to a sale.

But Forbes has dramatically reduced its dependence on print by expanding its conference business and online ad revenue, in part by aggressively pursuing native advertising via its BrandVoice platform. That's helped put Forbes in a small clutch of publishers whose digital revenue is equal to or greater than print (Forbes reached that point this year, with digital contributing 55 percent of revenue.) All that, plus its improved profitability (the company claims to be on track this year to have its most profitable year in six years), is likely to help Forbes command a much bigger price than the pittances that have recently been paid for other (money-losing) print properties that have recently sold, said media investment banker Reed Phillips of DeSilva + Phillips.

"They probably also have strong showing from their digital revenues and believe that’ll be valued different from print," Phillips said. "I think this will be a really good indicator of how investors will value a property that has done a good job making a transition to digital. It's not clear right now; they're kind of straddling print and digital, and it will be very interesting to see how buyers value it."

Forbes is seeking a price of $400 to $500 million, according to a source familiar with the matter. Assuming Forbes is making $50 million in EBITDA (earnings before interest, taxes, depreciation and amortization), and that digital properties are valued at  10 times EBITDA, or twice what print is, Phillips said, that price target would suggest the company is seeking a digital-like valuation.

That leaves the question of who would buy the company. Looking at other financial news players, Bloomberg LP recently bought rival Businessweek, which would presumably take it out of the market for another print magazine; Time Inc. already has Fortune. Other traditional publishers are more eager to shed than add print these days, making it more likely that the buyer would be a private equity company, Phillips said.

Here’s the memo from Perlis that went out today:

So much has been accomplished recently, and we're very much in the spotlight these days.  We're seen as innovators with extraordinary business momentum. This year is expected to mark our best financial performance in the last six years, strengthened by revenue growth in digital as well as licensing and conferences.  As a result of your tremendous work, we have received more than a few "over the transom" indications of interest to buy Forbes Media.  The frequency and serious nature of these overtures have brought us to a decision point.  We're organizing a process to test the waters regarding a sale of Forbes Media.  We have hired Deutsche Bank to represent us, and we expect interest from numerous suitors.

I'm proud to say that we've accomplished what no other traditional media company appears to have done: established a huge digital audience by efficiently creating quality content at scale, and we're innovating around new business models to maximize that relationship.  In the last three years, our unique visitors to Forbes.com have jumped from 12 million to 26 million, according to comscore worldwide.  Digital revenues are expected to increase over 25% by the end of the year.  In print, through September, we continue to be the share of market leader in our competitive set.  Our efforts have also focused on diversifying our revenue streams to complement our advertising-based businesses - and many of our initiatives have come to fruition this year. 

I will share more details about the interest in our company as events unfold; however, I was eager to inform you before you hear about this news elsewhere.  If you receive any inquiries from the press, forward them to Mia Carbonell in Corporate Communications. 

We will have an open conversation about our company at our next Town Hall meeting early next year.

Best, Mike

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