With the deadline for Newsweek bids fast approaching – and one of the reported interested parties, OpenGate Capital, famous for having bought TV Guide for $1 in 2008 – I figured it would be a good exercise to explore what the Washington Post’s struggling newsweekly might sell for.
Newsweek owner the Washington Post Co. has not revealed an asking price, according to a source with knowledge of sale discussions with potential bidders. Instead, they’re looking for buyers to set it – which is not unusual, considering the magazine has lost more than $41 million since 2007, $28.1 million last year and $2.3 million during the first quarter of 2010.
The steep losses also prevent the people who look at these deals from coming up with a multiple to guide them. ("When you're losing that kind of money," said one M&A source, "the norms go out the window.")
There are, however, a few that could provide a loose map.
BusinessWeek, for example, was reportedly sold by McGraw-Hill for less than $5 million – plus the assumption of its more than $30 million of debt – to Bloomberg in 2009. (Spin magazine was sold in 2006 in a similar deal.)
Then there is TV Guide – an iconic magazine that Rupert Murdoch once bought for $3 billion -- which sold to OpenGate in 2008 for less than half the cost of a single copy of the magazine, plus the assumption of $70 million to $100 million in subscription liabilities. (Macrovision loaned OpenGate about $9.5 million to sweeten the deal.)
Newsweek has subscription liabilities, too -- $60 million – that any would-be buyer will have to cover.
And they’ll have to cover the salaries of Newsweek’s full-time employees, which currently number 379.
With those caveats, it’s unlikely there will be many serious bids by Wednesday’s 5:00 p.m. (ET) deadline, despite editor Jon Meacham’s insistence that there are “a number.” At the very least, it will be nowhere near the 70 that Haim Saban said Allen & Company, the bank handling the auction for Newsweek and the Washington Post, told him there were a few weeks ago.
But chances are someone (or someone's ego) will not be able to resist the opportunity to turn around an iconic magazine brand.
Perhaps -- as he's hinted -- even Meacham himself.
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