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New York Times Acquires About.com for $410 Million

Cites Search-Based Advertising Capabilities and 'New Age Book Business'

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NEW YORK (AdAge.com) -- The New York Times Co. is purchasing Primedia's About.com, an aggregation of enthusiast Web sites, for around $410 million.

The purchase is the New York Times Co.'s largest Internet-related deal to date.

Internet strategies
The acquisition represents by far the largest bet the company is placing on ramping up Internet strategies. The deal is the largest for the company since it bought the Boston Globe for $1.1 billion in 1993. It also shelled out $295 million for the Worcester (Mass.) Telegram-Gazette in 1999.

If one goes by Times executives' comments, the deal marks the official transformation of the once-maligned Primedia unit from frog to prince. "We think it's right in line with where the Internet is headed," said Martin Nisenholtz, who today was promoted to senior vice president for the Times Co.'s digital operations. "The best aspects of this model have to do with creating and collecting information and making it available to users through search. About.com has been doing this for a very long time."

Less-traditional media
The Times Co. is not known as being one of the most acquisitive newspaper companies. But last month its Boston Globe announced plans to purchased a 49% stake in the free daily tabloid Metro Boston. Taken together with today's announcement, this could suggest an increased interest in less-traditional media for the venerable company.

About.com was purchased in a stock transaction in late 2000 by Primedia under its former CEO, Tom Rogers. At the time of the deal it was valued at $690 million, but declines in Primedia's stock reduced its value at closing to around $590 million, a Primedia spokesman said. (The deal was widely derided at the time.) The $410 million, a company release said, represents around a 10-times multiple of About.com's 2004 revenues, and an Ebitda (earnings before interest, taxes, depreciation and amortization) multiple of over 30.

Low-end Internet deal
But Len Forman, the Times Co.'s chief financial officer, defended the price, saying the company's 2005 projections equaled an Ebitda multiple in the "low 20s," which he said was "at the low end" of current Internet deal valuations.

"We see situations today where it seems like [Internet] valuations go up $10 million a day," said Reed Phillips, managing director of New York-based media investment banker DeSilva & Phillips. "It's the big difference between today and four or five years ago. Companies today actually make money."

At the heart of About.com's strategy are online guides created and run by enthusiasts for enthusiasts, and one key executive noted the imprimatur such a move from the Times Co. placed on forms of digital media. "It's the first traditional media company to have executed on a search and citizens' media strategy," said Dave Morgan, CEO of Internet-based online advertising company Tacoda. "The Times now has a professional blog platform that's already mature and well-tuned into the search advertising model."

'New-age book business'
"The two content models are so complementary," said Mr. Nisenholtz, meaning the Times' traditional journalistic model and what he termed "the new-age book business" model of About.com's myriad guides.

The integration of About.com into the company portfolio will be overseen by Mr. Nisenholtz. He said the company did not expect to tinker with About.com's existing model and had no plans to feed other Times Co. content through the sites.

Mr. Forman said About.com had around 80 employees and that no layoffs were anticipated.

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