On Monday,
The New York Times
(
NYT
) completed the sale of About Group, which it acquired in 2005, to
InterActiveCorp
(
IACI
) for a consideration of $300 million. However, the company states
that the net after-tax proceeds will be about $290 million, which
will be utilized for general corporate purposes.
The About Group segment comprises the websites About.com,
ConsumerSearch.com and Caloriecount.com, along with other related
businesses. The contents of the site are provided by
professionals.
With immediate effect of the divestiture, About Group will form
part of the InterActiveCorp's Search and Application division.
In an effort to offset the declining revenue and shrinking
market share, management had to take a hard decision to sell About
Group, which has been 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.
Another major reason is the declining print advertising revenue
in an uncertain economy, which compelled The New York Times Company
to divest About Group, allowing it 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 are not directly
related to 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 #3 Rank that translates into short-term Hold
rating for the next 1-3 months. We maintain our long-term 'Neutral'
recommendation on the stock.
IAC/INTERACTIV (IACI): Free Stock Analysis
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NEWS CORP INC-A (NWSA): Free Stock Analysis
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NY TIMES A (NYT): Free Stock Analysis Report
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