Canada's Thomson (NYSE:TOC), a self-described information resource, announced last week that it intends to put its print media unit, Thomson Media, back on the auction block.
The company attempted to sell its print publishing arm once already, back in early 2001. Of course, at that time, there was a bit of a bear market going on. Equity values were collapsing, and media companies in particular, from Time Warner (NYSE:TWX) to Yahoo! (NASDAQ:YHOO) to TheStreet.com (NASDAQ:TSCM) to Dow Jones (NYSE:DJ), were all reeling from the collapse in the advertising market. Not the best time to sell a business at a profit. And an especially bad time to sell if you wanted to get an attractive price on a business that depended in large part on paid advertising.
Well, 2004 is turning out to be a bit better on both fronts. Equities are generally rising in value, and the advertising market appears to be in the middle of a rebound as well -- especially for business publications. All in all, now looks like a pretty decent time to shop Thomson Media and its banking and financial services publications around once more.
The asking price? No one is certain just yet. But TheWall Street Journal quoted an anonymous source as saying that $200 million would not be an unreasonable sum. Factoring in Thomson Media's $164 million in sales in 2003, that would give the unit a price-to-sales ratio of roughly 1.2, which is less than half the current 2.8 price-to-sales ratio of Thomson as a whole. But when you consider that the print media unit is also less than half as profitable (on an operating profit basis) as the rest of Thomson, that discount is probably appropriate, advertising rebound or not. Also, remember that Thomson has a hefty debt load of $4.2 billion. The proceeds from the media unit's sale may not make much of a dent in that, but it will be a start.
And finally, there's a strategic argument for the sale. Thomson CEO Jim Malkin has described "electronic information" as being Thomson's core business. Selling the print media unit fits well with the idea of concentrating the company's focus on electronic publishing and information provision. The kinds of real-time financial information that the company receives from its new partnership with MarketWatch.com (NASDAQ:MKTW), for example, are much better distributed fresh over the Internet in real time than monthly, in hard copies of Practical Accountant.
Fool contributor Rich Smith has no interest in any of the companies mentioned in this article.
