Sold inside The Athletic to the New York Times

Athletic co-founders Adam Hansmann and Alex Mather

Source: The Athletic

In September 2020, The Athletic announced it has reached 1 million subscribers. Co-founder Alex Mather talked about what he would need to sell.

“We don’t think about exits, and we don’t know the downside,” Mather said. “There are very few companies that are doing what we’re doing. The New York Times is the tip of the spear, and they’re growing faster than ever. We don’t know what our cap will be. When they’re going to be. I feel like we know our ceiling is, so it’s time for Adam and I to talk. But we haven’t come close to having a conversation yet.”

By March 2021, six months later, The Athletic has began negotiations to merge with Axios. Two months later, The New York Times began negotiations to buy The Athletic. That kicked off a broader sales process, leading to interest from companies including Amazon, Conde Nast, DraftKings and private joint stock company TPG Capital, CNBC found out.

It’s not clear exactly why Mather and Hansmann changed their minds so quickly, but the company needed a fresh round of funding. The Athletic burned about 100 million dollars from 2019 to 2020, while bringing in just $73 million in revenue for the same time period, as first reported by The Information. The Athletic never profitable.

Athletic considered raising more capital, but financing costs and extra dilution on founders and other investors pushed Hansmann and Mather in the direction of a sale, according to people familiar with the matter.

However, some investors and advisers close to the company have urged Mather and Hansmann not to sell, according to people familiar with the matter, who asked not to speak publicly because the discussions are private. private. Some of this discontent surfaced this week when Venture capital fund Powerhouse Capital sent a letter to its limited partners admitted that they did not want The Athletic to sell.

“While we believe there is still more value to be unlocked for The Athletic’s platform, it looks like the NY Times will build on that foundation,” Powerhouse said. write in a memo First reported by Axios and confirmed by CNBC.

The following is an account of The Athletic’s sales roadmap. A spokesperson for The Athletic declined to comment.

Sales decision

While The Athletic has always been focused on sports, that was never the ultimate plan for Mather and Hansmann, according to people familiar with their thinking. In the early days of The Athletic, it seemed to merge with Nate Silver’s to combine sports and political verticals, and even toy with the idea of ​​partnering or merging with American test kitchen, who requested anonymity because the discussions are private.

In March 2021, Axios approached The Athletic with the idea of ​​a merger, according to people familiar with the matter. The two start-ups admire each other’s work and focus on Extend local coverage.

Axios will be the front company with The Athletic folded underneath, one of the people said. Mather and Hansmann were interested in the idea if the combined company could then list shares through SPAC, which was hot at the time. But Axios co-founder and CEO, Jim VandeHei, is skeptical about SPAC. In the end, both sides decided to leave.

Once The Athletic is interested in merging become public knowledge, the New York Times approached The Athletic to acquire the company. But those negotiations also broke down when the two sides could not come to an agreement on the value. According to people familiar with the matter, the New York Times has put the price at around $500 million. The Athletic last raised capital at a valuation of $530 million in January 2020. Some people close to The Athletic as investors and advisers feel The New York Times has underestimated the company.

Athletic decided to have Liontree, a small media M&A bank, to evaluate potential sales options and consider alternative funding sources. Liontree told The Athletic it could find buyers willing to pay between $500 million high and $700 million low, one of them said.

Amazon, Conde Nast and DraftKings showed interest, according to people familiar with the matter. Amazon’s interest stems in part from its recent push to broadcast games, including Thursday Night Football, one of the people said. Having a well-curated sports landing page for promoting and analyzing games can bring synergy with its live match broadcasts. Spokespersons at Amazon, Conde Nast and DraftKings did not respond to requests for comment.

After activating the tires, those companies never became serious buyers, three of the people said. Private equity firm TPG has become the Times’ biggest competitor to buy The Athletic, the people said. Selling to a private equity firm would be a much harder challenge than selling its employees, who might be worried about losing their jobs, two of them said. A spokesman for TPG declined to comment.

The New York Times was not initially invited to participate in the new auction, as its previous negotiations were no longer available. But CEO Meredith Levien decided to return to the table. When it became clear The Times would only have to increase its initial offer by about 10%, a deal came together. Given the company’s strong press reputation and possibly unattractive terms around raising more capital, Hansmann and Mather agreed to sell.

Some people close to the company see the deal as a glaring success, one of the biggest exits in the history of digital media. The two founders built the company from the ground up and turned an idea – a nationally registered sports journalism product focused on in-depth local reporting and analysis – into a $550 million entity dollars. Athletic sold for “10 times the price/revenue valuation multiple” According to research firm CB Insights, highlighted The Athletic has a good price tag for a company with less than $50 million in annual sales in 2020.

Advocates point out how The New York Times, which is clearly adept at growing digital subscribers, is perfectly suited as a buyer for a site of sports journalism that prides itself on quality. newspapers. Athletic wants to grow globally, and so does The New York Times. Athletic wants a safe home for its journalists, and what company could be more proud of its journalists than The New York Times? Athletic wants to expand into podcasts and digital video, while pushing into a rich digital format, and The New York Times has established itself as a leader in those areas.

On the other hand, deal skeptics talk about how The Athletic shorted its vision by selling now. Several investors told Mather and Hansmann that they feel The Athletic could be a billion-dollar company. As a separate executive entity in The New York Times, it is still possible. But if it happens, it will be New York Times shareholders who will see that value increase.


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