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Amazon among the names keen on The Athletic ahead of its sale to the New York Times

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Amazon among the names keen on The Athletic ahead of its sale to the New York Times

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Athletic co-founders Adam Hansmann and Alex Mather

Source: The Athletics

In September 2020, The Athletic announced it had hit 1 million subscribers, and optimistic co-founder Alex Mather spoke about what it would take to sell.

“We just don’t think about the exit, and we don’t know the benefits here,” Mather said at the time in an interview with CNBC. “There are very few companies doing what we do. The New York Times is the tip of the spear, and they’re growing faster than ever. We don’t know what our ceiling is. When we have the feel like we know what our ceiling is, then it’s time for [fellow co-founder Adam Hansmann] and me to discuss. But we’re not about to have a conversation.”

In March 2021, six months later, The Athletic had entered into talks to merge with Axios. Two months later, The New York Times entered talks to buy the subscription sports website. That kicked off a broader sale process, attracting interest from suitors including Amazon, Conde Nast, DraftKings and private equity firm TPG Capital, CNBC has learned.

It’s unclear exactly why Mather and Hansmann changed their minds so drastically, but one thing was clear: the company needed a fresh injection of capital.

Athletic spent around $100 million between 2019 and 2020, while only bringing in $73 million in revenue over the same period, as The Information first reported. Athletic have never been profitable.

Athletic sought to raise more capital, but the cost of funding and additional dilution for founders and other investors pushed Hansmann and Mather to sell, according to people familiar with the matter.

Still, several investors and advisers close to the company have privately urged Mather and Hansmann not to sell, according to people familiar with the matter, who asked not to be named because the discussions were private. Some of that dismay erupted this week when venture capital fund Powerhouse Capital sent a letter to its sponsors acknowledging that it didn’t want the sports site to sell out.

“While we believe there is still more value to unlock for The Athletic platform, it now appears the NY Times can build on this foundation,” Powerhouse wrote in a memo reported for the premiere. times by Axios and confirmed by CNBC.

What follows is an account of The Athletic’s journey to a sale, with help from people familiar with the matter. A spokesperson for The Athletic declined to comment.

The decision to sell

While The Athletic never strayed from their sporting purpose, Mather and Hansmann had other plans, according to people familiar with their thinking. In The Athletic’s early days, they considered merging with Nate Silver’s 538.com to combine sports and politics, and considered partnering or merging with America’s Test Kitchen, bringing food and sports together under one roof, said people who asked not to be named because the discussions were private.

Then in March 2021, Axios approached The Athletic with the merger idea, according to people familiar with the matter. The two relatively new journalism companies admired each other’s work and focused on expanding local coverage.

Axios would have been 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 go public through a special purpose acquisition company, or SPAC. But Axios co-founder and CEO Jim VandeHei was skeptical of SPACs, the sources say. Eventually, both parties decided to walk away.

Once The Athletic’s interest in the merger became public knowledge, The New York Times approached The Athletic about buying the company. But those talks also broke down when the two sides couldn’t reach an agreement on value. The New York Times was offering about $500 million, according to people familiar with the matter. Athletic had last raised capital at a valuation of $530 million in January 2020, and several people close to Athletic, such as investors and advisers, believed the New York Times was undervaluing the company. ‘business.

Athletic decided to bring in Liontree, a bank specializing in media mergers and acquisitions, to assess potential sale options while considering alternative financing. Liontree made a presentation to The Athletic believing he could find buyers willing to pay between a maximum of $500 million and a minimum of $700 million, one of the people said.

Amazon, Conde Nast and DraftKings have expressed interest, according to people familiar with the matter. Amazon’s interest stems in part from its recent push into streaming games, including “Thursday Night Football,” one of the people said. Having a well-trafficked sports landing page to promote and analyze games was seen to offer synergies with live game broadcasts. Spokespersons for Amazon, Conde Nast and DraftKings did not respond to requests for comment.

After kicking the tires, these companies did not become serious buyers, three of the people said. Instead, a fourth party, private equity firm TPG, became the Times’ biggest rival in The Athletic contest, the people said. But a buyout business owner was not seen as favored by website employees, whose jobs could have been at risk, two of the people said. A TPG spokesperson declined to comment.

The New York Times was not initially invited to participate in the new auction, given that previous talks had died. But general manager Meredith Levien decided to return to the table. When it became clear that the Times would only have to increase its initial offer by around 10%, a deal was struck, sources said. Times executives felt the increased bid made sense because The Athletic had also invested around $25 million more in the business since its first bid, one of the people said.

Given the firm’s strong journalistic reputation and potentially unattractive terms regarding raising additional capital, Hansmann and Mather agreed to the sale.

Some observers close to the company consider the sale a resounding success, one of the most lucrative releases in digital media history. Two founders built a company from the ground up and turned an idea — a national subscription sports journalism product focused on in-depth local reporting and analysis — into a $550 million entity. The Athletic sold at a “sparkling price/revenue valuation multiple of 10x”, according to research firm CB Insights, noting that the company made less than $50 million in annual revenue in 2020.

Proponents of buying The Times note that the Gray Lady is now poised to grow a digital subscriber base and is a perfect choice as a buyer for a sports site that prides itself on quality journalism. Additionally, both entities want to expand their global footprint.

Serious sportswriters have also found a home at The Times, which prides itself on its professional reputation for excellence. The Athletic also wants to expand into podcasts and digital video and push the boundaries of digital forms, which its parent company has proven to be a journalistic leader.

Others, however, see it differently. Several investors have told Mather and Hansmann, sources say The Athletic could have achieved a much bigger vision. They felt it had the promise of being a multi-billion dollar business.

As a separately managed entity within The New York Times, that could still happen. But if that happens, say these critics of the deal, it will be New York Times shareholders who will make the gain.

Amazon among the names keen on The Athletic ahead of its sale to the New York Times

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