Axel Springer AG (SPR), Europe’s biggest newspaper publisher, agreed to sell regional newspapers and women’s and television magazines to Funke Mediengruppe GmbH for 920 million euros ($1.2 billion) to focus on digital media.
The transaction, which will become effective Jan. 1, comprises titles including Berliner Morgenpost, Hamburger Abendblatt and TV Digital, Berlin-based Axel Springer said in a statement today. Privately held Funke will pay 660 million euros by June 30, 2014, at the latest, while Axel Springer will lend the remainder of the price to Funke for several years.
Chief Executive Officer Mathias Doepfner, 11 years into his job, has vowed to speed up a transition from the declining newspaper industry to digital publications and classified advertising, a move that’s set to depress profit this year. The non-print business was the biggest contributor to earnings in the first quarter.
“The price looks really good for Springer,” Stefan Wimmer, a Frankfurt-based analyst at Bankhaus Metzler who recommends buying Springer shares, said by telephone. “In future, the company will have a stronger focus on digital content and digital classifieds.”
Springer rose as much as 12 percent to 38.71 euros, the highest intraday price since April 2012, and was trading at 38.60 euros as of 11:37 a.m. in Frankfurt. The stock has gained 20 percent in 2013, valuing the publisher at 3.82 billion euros.
The units in the Funke transaction generated earnings before interest, taxes, depreciation and amortization last year of 94.8 million euros, while revenue totaled 512.4 million euros. That 18.5 percent Ebitda margin on sales compares with the 19 percent group margin on revenue of 3.3 billion euros.
Springer started a program last year of sending executives, including Kai Diekmann, the editor-in-chief of Germany’s biggest tabloid Bild, to Silicon Valley on months-long boot camps. Four managers share an apartment in Palo Alto, California, and spend their days meeting with startup founders and Stanford University professors.
CEO Doepfner has pursued a strategy of returning to basics to restore earnings at the newspaper business, in particular with classified ads. The big three classified categories -- jobs, homes, and cars -- had been newspapers’ main source of cash for decades, until free alternatives such as Craigslist and Trulia pushed the market almost entirely online.
Doepfner has tried to grab some of that business back, spending more than $1 billion since 2009 to buy classified-ad hubs like France’s Seloger.com and Norway’s StepStone, a job-seeker site. Doepfner has said he’s looking at Deutsche Telekom AG (DTE)’s Scout24 unit, Germany’s biggest online site for classifieds.
Axel Springer’s digital revenue rose 22 percent to 1.17 billion euros last year, overtaking the sales of its German newspapers for the first time. Digital profit jumped more than 50 percent to 243 million euros.
Springer and Funke Mediengruppe will set up joint ventures to distribute and market print and digital media. Funke is already Germany’s biggest regional-newspaper publisher through its Essen-based Westdeutsche Allgemeine Zeitung.
Funke Mediengruppe is owned by the family of the same name after the acquisition of a 50 percent stake held by the Brost family in January 2012. Jakob Funke and Erich Brost founded the newspaper in 1948. Before today’s deal, the group owned more than 30 newspapers, 170 special-interest and trade magazines, 100 advertising papers and 400 customer magazines, according to its website.