{UAH} AGAIN AMERICANS LOOSE A MAJOR ASSET TO CHINA

Forbes Magazine Sold to Hong Kong Group; $475 Million Valuation

Friday, 18 Jul 2014 03:17 PM

The Forbes family, an emblem of American wealth and pioneer of business journalism, is giving up control over the media empire it cultivated for almost a century by selling a majority stake to a Hong Kong-based group.

The transaction valued Forbes Media LLC at $475 million, said a person with knowledge of the matter, who asked not to be identified because the terms are private. The agreement, announced Friday, will hand over Forbes magazine and its widely followed ranking of the world’s richest people to a collection of investors led by Integrated Asset Management (Asia) Ltd., founded by investor Tak Cheung Yam, Forbes said in a statement.

Steve Forbes will remain chairman and editor-in-chief, and the Forbes family will hold a minority stake. While the handover is bittersweet, he said it allows the business to move forward.

“Companies should always remind themselves what their purpose is,” he said in a brief interview. “The buyers are entrepreneurs, and they understand entrepreneurial capitalism, and they have a vested self-interest in not messing with the editorial.”

Forbes, a two-time U.S. presidential candidate, put the magazine’s parent company Forbes Media LLC up for sale in November following years of dwindling profits as digital media cut into print advertising revenue. Forbes was originally seeking at least $400 million when it hired Deutsche Bank AG to run the sale after receiving interest from potential buyers, a person familiar with the matter said at the time.

New Owners

The new investor group also includes Wayne Hsieh, co-founder of Asustek Computer Inc., who is based in Singapore, Forbes said. Elevation Partners, the investment firm run by Roger McNamee, will sell its stake in Forbes as part of the transaction.

Chief Executive Officer Mike Perlis will continue to lead the company, which includes the magazine, digital properties, conferences and research.

The transaction is expected to close this year. Cadwalader, Wickersham & Taft provided legal advice to Forbes Media. Credit Suisse Group AG advised the investor group, whose legal counsel came from Skadden, Arps, Slate, Meagher & Flom LLP and LKP Global Law LLP.

Other foreign suitors had included China’s Fosun International Ltd.; Singapore’s Spice Global Investments Pvt, whose businesses range from finance to health care and entertainment; and Germany’s Axel Springer SE, publisher of the Russian edition of Forbes magazine, people with knowledge of the matter said in February.

Declining Dynasties

The sale marks the continued decline of American media dynasties, a once-thriving and elite group that had included the Chandlers, who owned the Los Angeles Times until a 2000 merger with Tribune Co.; the Bancrofts, who sold the Wall Street Journal to Rupert Murdoch; and the Graham family, which landed a new owner for the Washington Post in Amazon.com Inc. founder Jeff Bezos.

The few holdouts include the Ochs-Sulzberger family, who still control the New York Times; the Hearst family of Hearst Corp.; and the Newhouses, who own Conde Nast Inc.

The Forbes family had tried to stabilize its fortune by selling a 45 percent stake in the company to venture capital firm Elevation Partners in 2006 for about $240 million. They also raised money through asset sales including the Manhattan headquarters building, their collection of Faberge eggs and the licensing of their name to a real-estate venture and an online for-profit education company.

The publisher also aggressively pursued online marketing deals, known as “native advertising,” allowing paying advertisers to publish their own content on the Forbes website.

Forbes Finances

During the sale process, Forbes executives emphasized the brand as a platform for events and conferences as well as real-estate developments, a way to extend beyond its traditional media roots.

Forbes projected revenue of $144.6 million for 2013 and $162.8 million for 2014, according to the pitch book obtained by Ken Doctor, a media analyst for Outsell Inc. Doctor published the contents of the documents on the website of Harvard University’s Nieman Journalism Lab.

The company also estimated that its earnings before interest, taxes, depreciation and amortization would reach $33.4 million this year, according to the documents. Magazines typically sell for 5 or 6 times Ebitda, implying a value closer to $200 million for Forbes, Doctor said.

Even so, Forbes’ influence across the globe made it a sought-after property, especially in growing economies, according to Doctor.

“Forbes used to just be a magazine, now it’s a worldwide business brand,” he said in a February interview. “How many people in their 20s and 30s are in emerging business markets, Asia, Africa, Latin America? That’s my sense of the great growth potential of the Forbes brand.”

Ranking Billionaires

Billionaires around the globe 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.”

Bloomberg News competes with Forbes and publishes its own ranking of the world’s rich, the Bloomberg Billionaires Index.

B.C. Forbes founded the 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 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 took a toll on its finances.

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

Other publishers are also selling storied magazine brands as they struggle with the decline in print advertising. IAC/InterActiveCorp sold Newsweek to IBT Media in August, and McGraw-Hill Cos. sold Businessweek to Bloomberg LP, the parent of Bloomberg News, in 2009.

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