Posted by: Jon Fine on July 13, 2009
In a move that confirmed weeks of increasing chatter, the McGraw- Hill Companies today stated that it is evaluating “strategic options” for its 80 year old magazine BusinessWeek—-a confirmation that generally precedes seeking a buyer for a property.
“The McGraw-Hill Companies today announced that it is exploring strategic options for BusinessWeek,” read the relevant portion of the two-sentence statement. No mention was made of who is handling the potential sale, but the firm assisting McGraw-Hill in this process is the New York-based investment firm Evercore Partners. Evercore vice-chairman, Pedro Aspe, has been on McGraw-Hill’s board of directors since 1996. A spokesman for McGraw-Hill declined to offer any further comment or detail beyond the statement. This morning, Bloomberg LP’s Bloomberg newswire service reported that McGraw-Hill was seeking a buyer for BusinessWeek and had retained Evercore to do so.
Many contours of the process remain obscure, but individuals familiar with the matter say that McGraw-Hill had held discussions earlier this year with Bloomberg regarding a sale of BusinessWeek. Those discussions concluded with Bloomberg passing on a potential deal. (The McGraw-Hill spokesman declined to comment on this point.)
In an email to BusinessWeek employees, BusinessWeek President Keith Fox said “We all know that the media industry is facing unprecedented challenges. The growth of digital innovation has created new entrants, new challenges and entirely new business models for media companies. The move of readers and advertisers online, coupled with the impact of the recession on print advertising, has created additional urgency on the need for change. Given the current market environment, the Corporation has decided to explore strategic options for BusinessWeek.”
The move comes after BusinessWeek, like its major competitors Forbes and Fortune, has suffered serious ad losses in ’09. According to Publishers Information Bureau, BusinessWeek’s ad pages are down 36.8% in the first half of 2009, as compared to 38.2% for Fortune and 30.2% for Forbes. The high-water mark for BusinessWeek came during the dot-com fuelled delirium of 2000, a year in which the magazine ran 5,993.7 ad pages. Last year it ran 1,882.4. Earlier this year, the ad downturn claimed Conde Nast Publications’ Conde Nast Portfolio, an ambitious glossy monthly business magazine that debuted in 2007 with much fanfare (and much spending) but did not survive beyond its second anniversary.
Analysts noted a sale, should it occur, would not have major ramifications for McGraw-Hill. “Given [presumed] current losses and limited near-term prospects for profitability, we believe McGraw-Hill will most likely receive minimal proceeds,” wrote Peter Appert, of Piper Jaffray, in a report that came out this afternoon. “With BusinessWeek magazine accounting for roughly 2% of total [company] revenues and generating a small loss, its potential divestiture would not meaningfully impact the company's overall financial results.”
But, Appert continued, “its divestiture would, however, signal a more proactive stance on the part of management in efforts to eliminate underperforming assets and optimize the company's portfolio.”
In a 2004 interview—well before the launch of Portfolio--Conde Nast CEO Charles O. “Chuck” Townsend said that the one magazine he’d like his company to own would be BusinessWeek. (Scroll way down here.) But, given the company’s experience with Portfolio, it’s not clear if that sentiment persists. Spokeswomen for Conde Nast did not immediately respond to inquiries.
Potential buyers or partners (with the sizable caveat that economic conditions affecting the publishing world may deter many of them, if not all of them, from bidding on a sizable media property) could include Bloomberg LP; Morningstar Founder Joe Mansueto, who also owns Fast Company and Inc.; and Pearson, publisher of the Financial Times and half-owner of The Economist.
In truth, given the dynamics of the publishing and magazine sectors I would expect a buyer would come from an unexpected perch: a cash-rich investment fund seeking entry to the media world and a platform for future acquisitions, or a deep-pocketed mogul type whose ambitions are not yet known to the wider world.
(Disclosure: As you may have noticed, I work for BusinessWeek.)