Bloomberg News

Forbes Media Is Working With Bankers to Sell Company

November 15, 2013

Forbes Media LLC, famous for tracking the wealth of billionaires across the globe, will now get to see how much its 96-year-old brand, dented by the rise of digital media, might fetch in the marketplace.

The New York-based publisher of Forbes magazine and Forbes.com hired Deutsche Bank AG to examine a sale after receiving interest from potential buyers, according to a memo sent to employees by Chief Executive Officer Mike Perlis.

The announcement follows years of dwindling profits as the founding Forbes family, a pioneer in business journalism, tried to stabilize its fortune by selling a stake in 2006, raising money through asset sales including its Manhattan headquarters building, and moving aggressively into digital publishing.

While Forbes is seeking at least $400 million in a sale, according to a person familiar with the matter, the company will struggle to land more than $200 million, another person said. The people asked not to be identified discussing a private matter.

Among potential buyers are billionaires who have been enamored of Forbes ever since it began ranking the world’s rich, according to Stewart Pinkerton, who wrote about the family in his 2011 book “The Fall of the House of Forbes.”

“The thought has always been that some rich guy in the Middle East, or some guy in Hong Kong, or a Russian oligarch would buy it,” he said in an interview.

Billionaire Buyers

Billionaires have snapped up other well-known media properties this year. Amazon.com Inc. founder Jeff Bezos acquired the Washington Post for $250 million, and Boston Red Sox owner John Henry paid $70 million for the Boston Globe.

Bloomberg News, which publishes its own ranking of the world’s billionaires, competes with Forbes.

B.C. Forbes founded the namesake magazine in 1917 and it prospered under his son Malcolm, becoming a champion of capitalism and a showcase for American wealth -- including Malcolm’s. Steve, B.C.’s grandson, ascended to president and CEO of Forbes and editor-in-chief of the magazine in 1990. He twice ran unsuccessfully for U.S. president as a Republican candidate in the 1996 and 2000 primaries.

While the company prospered during the dot-com boom, the subsequent bust in 2000 and migration of advertising from print to online sites slammed its finances.

The Forbes family sold off its collection of Faberge eggs, Victorian art and a raft of high-end real estate including a 171,400-acre ranch in Colorado that sold for $175 million. New York University bought its headquarters in 2010, home to Forbes since 1962.

Spurned Offer

The family got a $400 million buyout offer from fashion publisher Conde Nast Inc. in 2004, which it turned down because it wasn’t high enough, according to Pinkerton’s book.

Forbes Media sold a minority stake in 2006 to Elevation Partners, the venture capital firm run by Roger McNamee and backed by U2 lead singer Bono. The group paid about $240 million for about 45 percent of Forbes, according to a person with knowledge of the matter.

Perlis was hired in 2010, the first person outside the Forbes family to run the company. This year is expected to be the company’s best in the last six, Perlis wrote in the memo, crediting digital, licensing and conference revenue for the success.

Digital ad sales account for more than half of the company’s revenue, and the company is profitable, according to another person familiar with the finances. The company relies on more than 1,000 contributors to post content for its online site, many paid little or nothing.

Its online ad sales have gotten a boost from an early push into native advertising, an ad format where marketers can publish posts under the Forbes nameplate for a fee.

Digital Success

Forbes’ financial success with the format could give the company a better valuation than if it were just considered a magazine publisher, said Ken Doctor, a media analyst with Outsell Inc.

“As one of the first and leading practitioners of content marketing, or native advertising, however you want to call it, Forbes knows something that other publishers want to know,” Doctor said. “This is its growth area, but as just a magazine brand you can’t justify that kind of valuation.”

Magazines typically sell for 5 or 6 times earnings before interest, taxes, depreciation and amortization, according to Doctor. At a $400 million valuation, under that multiple, Forbes would have to have at least $67 million in annual earnings to justify such a price.

Storied Brands

In the U.S., Forbes’s print advertising pages fell 34 percent from 2008 to 1,834 last year, according to the Publisher’s Information Bureau. Advertising sales were $275 million last year, down 19 percent in the same period, based on published ad rates. Editions of Forbes are also published in Asia and Europe.

Publishers are selling storied brands as they struggle with similar headwinds. Newsweek, the 80-year-old publication, was sold to IBT Media in August by IAC/InterActiveCorp, and McGraw-Hill Cos. sold Businessweek, which was founded in 1929, to Bloomberg LP in 2009. Maxim magazine, the bawdy men’s title, was sold to Darden Media Group by its creditors in September.

Mia Carbonell, a spokeswoman at Forbes, declined to comment, as did a spokesman for Deutsche Bank.

To contact the reporters on this story: Edmund Lee in New York at elee310@bloomberg.net; Alex Sherman in New York at asherman6@bloomberg.net; Leslie Picker in New York at lpicker2@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net; Jeffrey McCracken at jmccracken3@bloomberg.net


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