Business Insider Acquisition Price More Than Generous

March 4, 2016, 4:26 PM UTC
Axel Springer SE Annual News Conference
Mathias Doepfner, chief executive officer of Axel Springer SE, pauses during an annual news conference at the company's headquarters in Berlin, Germany, on Wednesday, March 4, 2015. Axel Springer bought a 15% stake in Axel Springer Digital Classifieds JV from General Atlantic for cash, Doepfner said. Photographer: Krisztian Bocsi/Bloomberg via Getty Images
Photograph by Krisztian Bocsi — Bloomberg via Getty Images

When the online-only news site Business Insider was acquired last year by German media giant Axel Springer, there was much debate about the price that the larger company paid. That’s because the American news startup was a private company and didn’t release its financial results.

Now, thanks to an earnings report from its European parent, we know exactly what BI’s revenues and losses were.

In its latest quarterly earnings report, Axel Springer—which owns a number of major daily newspapers and magazines in Germany, as well as a large online-classified site—said that if it had owned Business Insider for all of 2015, the site would have contributed $42.8 million in revenues.

When the acquisition was announced, Axel Springer said it paid $343 million for the outstanding shares of Business Insider (it already owned 9% from a previous financing round while investor and Amazon CEO Jeff Bezos retained his 3% stake). This valued the entire company at approximately $450 million.

At that point, analysts tried to estimate what kind of multiple the acquisition price represented. The Financial Times said it was about nine times the revenues of Business Insider, and a story published by Business Insider itself said that the price amounted to “6x forward revenue projections.”

Now that we can do the math, it turns out that Axel Springer actually paid a little over 10.5 times 2015 revenues for the New York-based news publisher. Based on other acquisitions in the media industry, this is a more than generous price for a money-losing news property. A typical multiple for an acquirer to pay would be closer to five or perhaps six times revenues—even for a site that is growing quickly.

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On the profit front, meanwhile, although Business Insider co-founder and CEO Henry Blodget has talked in the past about his site being close to break even, Axel Springer’s financial results show that if it had owned Business Insider for all of 2015, it would have absorbed a loss of about $12 million.

Why would the German media company be willing to pay such a generous price for a money-losing news site? During and after the acquisition, Axel Springer CEO Matthias Dopfner talked about how rapidly Business Insider was growing (its revenues grew by more than 40% in 2015). He also spoke about new features the site would be offering, including a subscription option and an expansion into a number of other topic areas.

In addition to that, however, the acquisition also gave the German media company a substantial—and growing—non-German asset. Axel Springer already demonstrated it was willing to pay as much as $1 billion for the Financial Times—a deal it ultimately lost to Japan’s Nikkei group. Spending half that amount on Business Insider probably didn’t seem like much of a stretch.

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