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Martha Stewart Living Omnimedia Inc. Sinks on Acquisition Offer

By Timothy Green – Jun 22, 2015 at 12:18PM

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Sequential Brands will pay $6.15 per share for Martha Stewart Living, undoing the stock's gains during the end of last week.

What: Shares of Martha Stewart Living Omnimedia (MSO.DL) sank on Monday after it was announced the company would be acquired by Sequential Brands (SQBG) for $6.15 per share. This came after rumors of an acquisition sent the stock soaring on Thursday and Friday of last week, pushing the stock price well above the offer price. At 11:30 a.m. Monday, the stock was down about 13.5%, trading about 10 cents below Sequential's offer price.

So what: Martha Stewart Living has been struggling for years. After revenue peaked at $328 million in 2007, each year since then has brought with it a revenue decline, with the company managing only $142 million of revenue in 2014. 2007 was also the last year that Martha Stewart Living managed to post a profit.

Martha Stewart Living will be added to Sequential's roster of brands, which includes Jessica Simpson, Heelys, and William Rast, among others. Martha Stewart, who founded Martha Stewart Living in 1997, will serve an integral role in the new holding company that will emerge from this deal, serving on the board of directors and taking on the role of chief creative officer.

Now what: Sequential Brands is paying about three times trailing-12-month sales for Martha Stewart Living, but awareness of the Martha Stewart Brand likely makes the deal worthwhile. According to Yehuda Shmidman, CEO of Sequential, the Martha Stewart brand has 96% awareness among women in the United States, and 7 out of 10 women say that Martha Stewart influences the way they think about, organize, and manage their homes.

The challenge for Sequential will be leveraging this awareness in order to turn Martha Stewart Living around. If Sequential succeeds, the price paid for the company may end up looking like a bargain a few years down the road. The acquisition is expected to close in the second half of 2015 and includes a 30-day "go-shop" period for Martha Stewart Living Omnimedia.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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