Unshackled Martha Stewart mulls IPO

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Having finally freed herself from Time Inc., Martha Stewart is already plotting her next big move--going public.

"I'd be very keen to do a public offering at some point . . . probably within the next three to five years," Ms. Stewart told Advertising Age.

The disclosure comes just days after the formation of Martha Stewart Living Omnimedia, a new company chaired by Ms. Stewart in which Time Inc. will hold less than a 20% stake.

Terms of the breakaway were not disclosed, but estimates on the amount of cash put up in the buyout range as high as $75 million. Ms. Stewart had been negotiating her separation from Time Inc. for more than a year.


"We didn't want out, Martha wanted out," said Time Inc. President-CEO Don Logan. "She came to us and indicated she wanted to be more in control of her own destiny."

Time Inc. was said to be concerned that the highly successful magazine Martha Stewart Living was too dependent on one person.

"The magazine is not at a point where it is separable from the personality," Mr. Logan said.

The magazine will maintain ties to Time Inc. beyond the equity stake; it will continue to be distributed by Time Distribution Services and continuity books based on the magazine will continue to be published by Oxmoor House, an imprint of Time Inc.'s Southern Progress unit.

Negotiations to establish the new company were tedious. Ms. Stewart said she had talked to more than 10 investment bankers and commercial banks in the past 18 months. In the end, she said, "we decided to finance it through internal cash flow" without an outside partner.


Some industry executives speculate that Time Inc. may have actually served as the banker with the equivalent of a promissory note that Martha Stewart Living Omnimedia must make interest payments on. Ms. Stewart declined to divulge the financial arrangements.

Martha Stewart Living Omnimedia will have three divisions, one concentrating on publishing and online services, one on TV and one on merchandising.

Over the next few years, Ms. Stewart anticipates steering the company in a new direction--one that could ultimately transform it from a media enterprise into a merchandising and direct mail-dominated business.

"Merchandising is going to be very important," Ms. Stewart said. "Martha by Mail is destined to probably be one of our largest businesses," she said of the direct mail unit that markets cooking and gardening products.

In merchandising, Ms. Stewart plans new strategic alliances with companies such as Kmart Corp. and Sherwin-Williams Co.


In addition to the magazine, the media division includes her TV show, distributed by CBS' Eyemark Entertainment; the show is moving from a weekly to a weekday schedule in September. A series of how-to radio segments and a transaction-based Web site are being planned. Books formerly published by Clarkson Potter Book Publishers will also come under the new company.

This week Ms. Stewart begins a new affiliation with weekly appearances on CBS' "This Morning," jumping from NBC's "Today," where she has appeared every other week for five years.

The current centerpiece of the empire is Martha Stewart Living, Ad Age's 1995 Magazine of the Year. Its ad pages climbed 42.8% last year to 855.4. With estimated revenue of $60 million, the title posted its first full-year operating profit in 1996.

Ms. Stewart will relinquish her title as editor in chief of the magazine to focus on the company's broader activities. Stephen Drucker will succeed Ms. Stewart; he has been editor.

Sharon Patrick, a financial adviser to Ms. Stewart for the past several years, will be CEO of the new company and will serve on the board along with Ms. Stewart and Mr. Logan. David Steward, exec VP of Martha Stewart Living Enterprises under Time Inc., will be chief administrative officer and will serve as president of the publishing and online group.

Copyright February 1997, Crain Communications Inc.

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