Earlier this year, German publisher Axel Springer tried and failed to buy the Financial Times. Now it’s acquiring Business Insider.
Sold! Axel Springer Bets Big on Digital, Buys Business Insider.
Henry Blodget gets his payday.
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Peter Kafka covered media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.
This is the deal we told you about last week; Springer is announcing it today. The deal values Business Insider at $442 million — we had previously told you it would peg the site’s value at $560 million — but Springer already owned 9 percent of the company, and Amazon CEO Jeff Bezos, who had previously put his own money into the company, will leave it in there. When factoring out the cash still on the books, the value comes down to $390 million. Springer will end up writing a check for $343 million when the deal closes; it says Business Insider has 76 million readers and 325 employees worldwide.
However you count it, the deal sets a new mark for native digital publisher sales, previously held by the Huffington Post, which AOL acquired for $315 million in 2011. While several big digital publishers have taken on financing that values their companies above Business Insider’s sale price, none of them have actually sold at those levels yet.
The deal also puts the finishing touches on a remarkable comeback story for CEO Henry Blodget, who first rose to fame as an analyst during the Web 1.0 boom, then was banished from Wall Street.
After spending several years as a freelance writer and consultant, Blodget co-founded Silicon Alley Insider, the predecessor to Business Insider, in 2007, along with Kevin Ryan, an Internet entrepreneur whose other big bets include Gilt Groupe and MongoDB.
(The transaction should also mean that I’ll personally make money*, since I worked for Blodget and Ryan for a year at Silicon Alley Insider and own shares in the company.)
Axel Springer is a Berlin-based publisher best known as the owner of newspapers Die Welt and Bild. In July, it missed its chance to buy the Financial Times, the august, 127-year-old business news publisher, when it was outbid at the last second by Japan’s Nikkei.
Business Insider shares very little in common with the FT, other than they both deal with financial topics: While the FT has built out its own digital operations in recent years, it’s a subscription-based business whose stock-in-trade is sober, restrained reporting.
Business Insider is a fast-twitch publisher, pitched at readers who’ve grown up on the Web and based on a free, ad-supported business model. While the site was famous for its you-bet-you’ll-keep-clicking headlines and slideshows, it also did plenty of serious reporting; in the last year it has been on an expansion binge, adding a British outpost, a new tech site and a new gambit that’s supposed to create viral content that lives on platforms like Facebook.
Today’s transaction appears to link the FT and BI: Industry executives think Springer’s inability to land the Financial Times made them that much hungrier to get Business Insider.
They also believe the failed deal helped Springer justify Business Insider’s price, which values the company at around 9x its projected revenue for this year; in a conference call after the deal was announced, Springer executives said the $390 million value will be about 6x the company’s 2016 revenues. Another complementary theory popular with media executives I’ve talked to in the last week: Springer wanted a digital asset, and even at a rich price, Business Insider was more affordable than publishers like BuzzFeed and Vox Media, which owns this website.
Springer says Blodget and Julie Hansen, Business Insider’s chief operating officer, will stay with the company and have “extensive, long-term equity incentive” to stick around. Ken Lerer, who co-founded the Huffington Post and was an early investor and adviser to Blodget, will get a seat on the publication’s board; Lerer is also chairman of BuzzFeed.
Investors whose bet on Blodget paid off include Institutional Venture Partners, RRE, Andreessen Horowitz co-founder Marc Andreessen and Gordon Crovitz, the former publisher of the Wall Street Journal. The deal “shows how focused the most forward-looking traditional publishers are on owning the most innovative digital publishers,” Crovitz said this morning.
* It’s probably much less than you think, unless you spend much time in the startup investment world. But I’m not complaining, and that will be another story.
This article originally appeared on Recode.net.
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