The push by the Forbes family to sell its Forbes Media for $400 million means it’s asking for a selling price that is a staggering 26 times earnings, according to media analyst Ken Doctor, who has unearthed the confidential sales document and is pretty skeptical of the projected profits.
The typical publishing company in today’s environment sells at five-to-six times earnings, which would drop the estimated Forbes selling price to around $120 million.
Doctor, who writes under the Newsonomics title at the Nieman Journalism Lab, bares company figures showing Forbes’ total revenue in 2012 was only $137.9 million, up 9.4 percent from 2011.
Earnings before interest, taxes, depreciation and amortization, or Ebitda, were up only $1 million in 2012 to $15.3 million, a 7 percent jump from the $14.3 million in Ebitda in 2011.
“Forbes may have found non-traditional ways to make money, but the additional costs associated with that revenue may defeat a wider goal: maximizing profit,” Doctor states in a report out Thursday.
“The brighter side of this scenario: It can still grow, even if it won’t produce high profit,” the report found.
“The cloudier side: Forbes has peaked, that’s why its owners are maximizing the value of the buzz they’ve created and cashing out.”
The Financial Times reported that six bidders have advanced to a second round and are preparing to bid between $350 million and $475 million by the Jan. 31 deadline.
The Forbes family owns 55 percent of the company and Elevation, headed by U2 front man Bono, Roger McNamee and other Silicon Valley investors, owns the other 45 percent.
Clearly, Forbes Media is betting that its strides in digital advertising, licensing and its potential for global expansion beyond its 33 licensing deals and its creative use of non-paid bloggers, give it huge upside potential.
In the sales document, prepared by Deutsche Bank for prospective buyers, Doctor reports Forbes is expecting Ebitda to triple over the next five years — from $20.8 million in 2013 to $62.3 million in 2018.
But Doctor appears to scoff at the huge projected growth. “That is, in one word, optimistic,” he said.
He does acknowledge that overseas buyers have added incentive to pay a high price. “There’s clearly European, Asian, Middle Eastern and Latin American value to a print brand that may have seen its best days in the US,” he acknowledges.
The documents also show that Brand Voice — Forbes’ native ads, which take advertiser-paid content and make it look like it is editorial copy written by independent journalists — contributed $25 million to its corporate coffers in 2012, which he estimates is 20 percent to 25 percent of its ad revenue total.
Meanwhile, Mike Perlis, the Forbes CEO, flew back from his sales meeting in Vincennes, Puerto Rico, and held a town hall style meeting in New York on Thursday.
Perlis is trying to quell jittery staffers who are not happy about the company’s decision to exit Manhattan, where it has been based since its founding in 1917 by B.C. Forbes.
The company is heading to Jersey City — one stop away on the PATH trains but a world away, perhaps. for its reputation — by the end of the year.
Forbes did not comment on the numbers or conclusions in Doctor’s report.