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16 Percent Stake In MSLO



By FOLIO: Staff
03/07/2012

Property: 16 Percent Stake In MSLO
Buyer: J.C. Penney
Seller: Martha Stewart Living Omnimedia
Date: December 2011
Price: $38.5 Million

After initiating a search for investors and potential partners with Blackstone Advisory Partners in May 2011, Martha Stewart Living Omnimedia announced that retailer J.C. Penney invested $38.5 million in the multi-brand company, and will hold a 16.6 percent stake. This equated to 11 million new shares of Class A common stock, priced at $3.50 a share.

In February 2013, Martha Stewart retail outlets will be erected in the majority of JCPenney department stores. Retail items will be sourced and marketed by J.C. Penney. A MSLO e-commerce site will also launch in 2013, and will include J.C. Penney merchandise, in addition to other items selected by Martha Stewart staff.

The partnership signalled the importance e-commerce was taking on at the time with publishers. Partnerships were springing up all over the place between consumer publishers and commerce/retail outlets.

“One of the things we said at the time [of the Blackstone announcement], and I said very clearly, was we were reaching out to Blackstone to explore strategic partnerships. I believe that much of the press was written that we were selling the company. I was very consistent for the past six months that we were exploring strategic partnerships,” Lisa Gersh, MSLO president and COO, told Folio: when the partnership was announced. “This is the partnership that has resulted from this exploration, and we now consider the Blackstone process to be complete.”

As a result of this partnership, MSLO is expecting to receive over $200 million from J.C. Penney over the contractual 10-year period. The retailer will also have a spot on Martha Stewart Living Omnimedia’s board of directors.

This announcement marked yet another partnership between the retailer and a major media brand. Earlier in the year, J.C. Penney and Hearst’s Esquire teamed up to develop CLAD, an e-commerce site curated by Esquire staff and CLAD’s buying team. According to the CLAD website, “J.C. Penney is an investor in CLAD, not an owner. CLAD will debut under J.C.Penney’s newly formed Growth Brands Division, a business unit created to pursue high potential opportunities.” However, that partnership quickly dissolved when JCP pulled out a few months later to focus on other branding efforts.

Of the MSLO partnership, Gersh said, “I’m glad we did it, and I’m sorry it got taken for the fact that the company was for sale, because we sure spent a lot of time answering that question. And now the question’s answered.”

TAKEAWAY:
2011 was a year during which publishers moved aggressively into e-commerce. This deal took it one step further, while also squashing buyout rumors.

 

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By FOLIO: Staff
03/07/2012







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