April 19, 2024

DealBook: Martha Stewart Living Seeks Buyer or Partner

Martha StewartNick D./The Martha Stewart Show, via Associated PressMartha Stewart

8:15 p.m. | Updated

Martha Stewart is trying to cook up a deal.

Shares of Martha Stewart Living Omnimedia surged nearly 24 percent on Wednesday after the struggling media and merchandising company put itself in play, announcing that it had retained advisers to explore a sale of the company.

Blackstone Advisory Partners, the investment banking arm of the Blackstone Group, was hired to “review and respond” to investors who have expressed an interest in investing in the business. Still, people briefed on the matter say there are no offers on the table.

The decision to test the waters comes as Ms. Stewart, who turns 70 in August, is about to resume a more official role at the company. She will rejoin the company’s board after a five-year ban on her serving as an officer or director at a public company expires.

The Securities and Exchange Commission imposed the ban in August 2006 when it settled a civil case against Ms. Stewart, who was convicted in March of 2004 and was sentenced to prison for lying to federal investigators about a stock sale.

Any acquisition would have to go through Ms. Stewart, who founded the company in 1996 and now owns about half of its stock and 90 percent of its voting shares.

In a telephone interview, Ms. Stewart played down a possible sale and instead highlighted her company’s growth potential.

“The first priority is to reset the strategy,” she said. “Our brand is way, way stronger than the company is big.”

She said that she has also retained Alan D. Schwartz of Guggenheim Partners to weigh any potential opportunities alongside Blackstone. Mr. Schwartz, a prominent mergers-and-acquisitions banker, is the former chief executive of Bear Stearns.

The company, which has had considerable turnover in its executive suite over the last several years, appointed Lisa Gersh its president and chief operating officer on Wednesday. Ms. Gersh, a co-founder of Oxygen Media, a cable television channel aimed at women, is expected to assume the chief executive post within the next 12 to 20 months, the company said.

The chief executive job has been vacant since 2008, when Susan M. Lyne, a well-known media executive, left Martha Stewart to take the top job at the Gilt Group, a fast-growing online retailer.

Charles Koppelman, the company’s executive chairman, said Wednesday that the company had left the chief executive’s post open for Ms. Stewart “if and when she decided to return.”

Ms. Stewart said she had decided not to take the chief executive’s post because her television shows, cookbooks and public appearances as the face of the company would keep her plenty busy.

“I work seven days a week as it is,” Ms. Stewart said. “I can’t do it all.”

One possibility could be that Ms. Stewart would team up with a buyer and take her company private. Several bankers pointed to Hugh Hefner’s recent acquisition of Playboy as a possible blueprint. In March, Mr. Hefner and a private equity firm formed a partnership to purchase his company from shareholders for $200 million.

Another option would be to carve up Martha Stewart Living’s assets. Media companies could be interested in its magazine and television assets, while a licensing company could buy the Martha Stewart brand business. For instance, a company like the Iconix Brand Group, which owns such brands as Candie’s and Massimo and licenses them to manufacturers, might be interested in licensing the brand.

A buyer would be getting the company at a depressed price, even after Wednesday’s spike in the share price. Martha Stewart’s shares have dropped more than 70 percent over the last five years. Its market capitalization is $250 million.

Despite her past legal problems, Martha Stewart, both the woman and the brand, has shown some resiliency. She continues to play a leadership role at the company, which runs a panoply of businesses from magazines to television to Martha Stewart-branded merchandise.

Magazine and television revenue have been hurt by the downturn in advertising. Last year, “The Martha Stewart Show” moved to cable’s Hallmark Channel from syndication on NBC.

Its flagship magazine, Martha Stewart Living, recently named Pilar Guzmán as its new editor in chief. Ms. Guzmán previously ran Cookie, the now-defunct yet highly regarded magazine.

Martha Stewart has tried to make up for the decline in print media with an array of digital initiatives. During the Easter holiday, its Egg Dyeing 101 app for the iPhone became a top seller.

The company’s fastest-growing segment is its merchandising division, which generated $43 million in revenue in 2010. The company has had success placing the Martha Stewart brand on a variety of goods, like paint at Home Depot, bedding at Macy’s and dog shampoo at PetSmart. A partnership with Kmart, which sold “Martha Stewart Everyday” line of goods, expired last year.

The company’s retail and licensing partnerships could be the most desirable asset to a possible buyer with room to extend the Martha Stewart brand, especially internationally, say Wall Street analysts. “Merchandising is clearly what will drive value creation for this company,” said David B. Kestenbaum, an analyst with Morgan Joseph TriArtisan.

This post has been revised to reflect the following correction:

Correction: May 26, 2011

An earlier version of this article misstated when the S.E.C. imposed a five-year ban on Martha Stewart’s serving as an officer or director of a public company took effect. It was in August 2006, not in 2005.

Article source: http://feeds.nytimes.com/click.phdo?i=d42ac03435d8dd68496551959455b533

Speak Your Mind