May 27, 2011

Martha Stewart Living Might be for Sale

The Martha Stewart Living company may by looking for potential buyers. It was reported in the Newspaper that Martha Stewart had recently approached Allan D. Schwartz. Allan is the former CEO of Bear Sterns and is now an executive at Guggenheim Partners. Ms. Stewart was meeting with Mr. Schwartz to discuss a possible partnership between his company and Blackstone, for the acquisition of her company. Martha Stewart first found the company in 1996 and as of May 2011, owns about half of the company's stock, which includes 90% of the voting shares. Essentially, any deal particularly of this size, has to have her approval. Martha turns 70 next month (August 2011) , the same time, shes is expected to join the Board of Martha Stewart Living. In August, expires the 5 year ban of serving as an officer or director on a publicly traded company. This is the expiration time of the 5 year ban which was imposed after she did prison time for lying federal investigators conducting an investigation in an inside trading case. Even though Ms. Stewart was convicted in March 2004, the ban imposed on her by the SEC, took effect August 2006 which means it is set to expire next month.

Joining the Board once the ban expires, will allow her to take a more active role once again in the company. In the five years that Martha has been off the board, the company's stock has dropped 70% (as of May 25th 2011). There has been high turnover of executives at the company over the past several years. As a matter fact, just yesterday, the company announced that it had appointed Linda Gersh as President and Chief Operating Officer, although they also said that she is not expected to assume the role for 12 to 20 months. Ms. Gersh is the Co-founder of Oxygen Media, a cable channel aimed at female audiences. The top company post has been vacant for the last three years! The last person to hold the position was Susan M. Lyne who left the company to take a position with a fast growing online retailing company, The Gilt Group. Explaining why the top position had gone unfilled, yesterday Charles Koppleman, (Chairman of the Board) said that the position had been left open for Martha Stewart "if and when she decides to return." Wow, that one caught me by surprise. This is a large publicly traded company and that is the best answer Mr. Koppleman could give? Martha has recently made it clear she has no intention of taking the top spot. When asked about it, she recounted her busy schedule, her many public appearances, and basically said, as the "face" of this company, she has plenty to keep her busy already. I noticed today, that Ms. Stewart keeps a blog. Thought that was super cool discovery. I've linked here to the official Martha Stewart blog if you are interested in checking it out, or even following it.

Possible Martha Stewart Living Deals

Potential deals might include "carving up" Martha Stewart Living's assets. Spinning off its magazine and television segments and selling those to interested media companies, and selling its highly coveted brand to a licensing company could be a couple ways a deal could get done. Getting a good price on those assets, could potentially become a challenge. For example, over the years, advertising Revenues have declined, and profits have as well. The television show, the Martha Stewart Show, was removed from NBC from syndication, and ended up on the Cable's Hallmark channel. The company is trying some innovative approaches to generating more revenues however. Creating Digital Apps are a space that Martha Stewart Living has recently been exploring in. In fact, one of the iPhone apps they released called Egg Dyeing 101, became a top seller. As the company continues to find ways to grow and work on increasing revenues again, Martha has been looking for potential buyers. It will be interesting to see what happens with this company, although my sneaking suspicion is that it will undergo a vast transformation, be taken private, and may not trade publicly again for some time. That is my view, but time will tell exactly what happens with this company. I know it must be frustrating for Martha to come back, and have watched revenues and profits slide, while she sat on the sidelines, banned from taking a direct role in the company, until it expires in August 2008. From what I have seen in the news, Martha is proactively looking to steer the ship, but appears to navigating it to the world of acquisitions. The company's market capitalization today, is $250 Million.

6 month self updating chart of Martha Stewart Living Stock Price

1 comment:

Anonymous said...

At 70, Martha should be joining the AARP Board instead!