Dow Jones Finds Online Valuations Too High; TheStreet.com Hasn’t Scaled Enough

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Dow Jones is looking for more MarketWatch-like acquisitions…this much is public, as WSJ publisher and Dow Jones EVP Gordon Crovitz said at our NYC mixer last week. Now Reuters is reporting that at the CSFB conference last week, CEO Rich Zannino said, “We’re not that optimistic that we’ll find transactions [in the online space]. You look there and you see some of the valuations, it’s like it’s 1999 again.” An ideal multiple would be 12 times next year’s pro forma EBITDA, Zannino said.
When asked if TheStreet.com would be a good fit, he said, “We’re looking at things that have greater scale potential…. They’ve done a really nice job of building their business, but it hasn’t scaled on the Web that much.”
Also, coincidentally on TSCM, a story about a town hall-style meeting that DJ CEO did with employees on Monday. Zannino cited NBC as a company that’s having more success adapting to the digital age than its newspaper counterpart, New York Times. “The least instructive has got to be what The New York Times is doing,” said Zannino. “You can’t just sit there and ignore [the changes in the media industry] . That appears to be what they’re doing.”

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Shelly Jacobs

The trailing 12 mo. Morningstar EBITDA is $83.81MM. 12 times = $1.0052B, but current market cap is $1.89B, or 22.55 times.

The trailing 12 mo. Value Line EBITDA is $38.15MM. 12 times = $457.8MM, but current market cap is $539.07MM, or 14.13 times. [as the controlling family taking cash out via dividend payments, hence the low multiple]

Lagardere bought a 75.2 percent stake in French online news service Newsweb for about $100 million. 75.2% buyout values entire firm at approx. 11.6 times sales, or 52 times EBITDA. [assuming doubling of 1st 6 mo. of 2006 sales & EBITDA by 2006 yr end]. This Values Morningstar at $4.358B and Value Line at $1.983B.

Appears that Rich is like most everyone else I've met in the biz . . . "wants a $100 hooker for $10!"

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