On Monday, The New York Times (NYT - Analyst Report) completed the sale of About Group, which it acquired in 2005, to InterActiveCorp 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 - Analyst Report), 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.