The New York Times Company (NYT) recently declared a cash deal to sell-off About Group, which it acquired in 2005, to InterActiveCorp (IACI) for a consideration of $300 million. The transaction is expected to be completed in the coming several weeks. The media conglomerate plans to put in the cash proceeds for general corporate purposes.
The About Group segment comprises the websites About.com, ConsumerSearch.com and Caloriecount.com, along with other related businesses.
Management believes that About Group’s search engine provided light to the company’s diversified media portfolio. However, in an effort to offset the declining revenue and shrinking market share, management decided to sell About Group, which is facing declining revenue since the last two quarters.
About Group segment’s revenue dropped 8.7% in the second quarter to $25.4 million due to fall witnessed in both cost-per-click and display advertising. During the first-quarter, the revenue declined 23.1%. Adjusted operating profit plunged 30.4% to $10.2 million in the second quarter, reflecting a decline in advertising revenue.
Moreover, declining print advertising revenue, in an uncertain economy, compelled The New York Times Company to divest About Group, which would allow the company to re-focus on its core newspapers and concentrate on its online activities.
In order to survive in the tight advertising market, The New York Times Company aims to streamline its cost structure, strengthen its balance sheet and restructure its portfolio. Moreover, the company is offloading assets that bear no direct relation with the core operations.
As a part of its ongoing strategy, the media giant divested its remaining stake (210 Class B units) in the Fenway Sports Group in May 2012. The company also completed the sale of Regional Media Group, which has been struggling with shrinking advertising revenue.
The New York Times Company, which faces stiff competition from News Corporation (NWSA), carries a Zacks #2 Rank that translates into short-term Buy rating for the next 1-3 months. We maintain our long-term ‘Outperform’ recommendation on the stock.
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