Axios to Sell Itself to Cox Enterprises for $525 Million

From a New York Times story by Benjamin Mullin headlined “Axios to Sell Itself to Cox Enterprises for $525 Million”:

Axios, the digital media company that quickly gained traction since its founding five years ago with its distinctive bulletin-style scoops on the realms of politics, business and technology, has agreed to sell itself to Cox Enterprises, according to two people with knowledge of the deal.

The deal values Axios at $525 million, said the people, who spoke on condition of anonymity to discuss confidential terms of the agreement. The transaction, which is set to close this month, is expected to be announced on Monday.

The deal is structured so that the company’s three founders — Jim VandeHei, the chief executive; Roy Schwartz, the president; and Mike Allen, a journalist — have financial incentives to stay at the company. Each will be a minority shareholder and will continue to make day-to-day newsroom and business decisions. Alex Taylor, the chief executive and chairman of Cox Enterprises, will join the Axios board.

Axios became a Beltway media fixture shortly after it was founded in 2017, with readers devouring stories about President Donald J. Trump and his administration. Jonathan Swan, Axios’ national political correspondent, gained attention for his probing on-camera sitdowns with Mr. Trump and White House officials, and newsletters from journalists such as Dan Primack and Sara Fischer captured the attention of the business set.

The deal offers a rare flicker of hope for the digital publishing sector, which has been fraught with difficulty for investors and operators over the last decade. Some of Axios’ peers have struggled to go public, sell or raise funding at favorable valuations as investors cooled on digital advertising, a market dominated by tech giants like Google, Meta and Amazon.

Axios is selling at roughly five times its projected 2022 revenue of more than $100 million, according to one of the people, who was familiar with a presentation Axios made to its board. The company was profitable for the last three years but is not expected to be profitable in 2022, partly owing to investments in HQ, its communications software division, the person said.

In an interview, Mr. VandeHei said that the company’s founders decided to sell now because they found a buyer that was committed to journalism and that would pay a fair price, allowing investors that backed Axios early, including NBCUniversal and Emerson Collective, to receive a substantial return.

Mr. VandeHei said it was also important to him that any deal allowed the management team to remain in place, because he was not planning to step aside anytime soon.

“Not a chance,” Mr. VandeHei said. “This is my life’s work, it’s my passion. I would do it for free.”

The deal provides a coda of sorts for Axios’ founders, who left Politico in 2016 amid a tug of war over the future of that company, which Mr. VandeHei also helped found. He, Mr. Allen and Mr. Schwartz started Axios the next year. Politico went on to sell itself to the German publishing conglomerate Axel Springer for $1 billion last year.

Cox Enterprises is not buying out HQ, which Axios is spinning out into a separate company. Mr. Schwartz will be chief executive of that company and Cox will take a minority stake, with Mr. VandeHei serving as chairman, one of the people with knowledge of the deal said.

The deal to acquire Axios harks back to the media roots of Cox Enterprises, a family-owned privately held company based in Atlanta that generates most of its revenue from its cable and broadband businesses. The company traces its beginnings to 1898, when its founder, James Middleton Cox, bought what is now The Dayton Daily News for $26,000. In 1939, Mr. Cox purchased the newspaper that would eventually become The Atlanta Journal-Constitution, and the company still owns both publications.

“It’s a big part of who we are and what we do,” Mr. Taylor said. “We’ve been in the news business for 124 years, and this speaks to the legacy our grandparents left us.”

Cox Enterprises, which already owned a minority stake in Axios, is putting $25 million of cash on its balance sheet to fund the company’s growth. Mr. VandeHei said that Axios planned to build a series of subscription products, similar to those offered by Politico Pro, on topics including technology, politics and legislative policy.

Axios also plans to continue starting more regional editions, which already exist in 24 cities including Philadelphia, Des Moines and Nashville. Mr. VandeHei said the company aimed to be in at least 100 cities in the coming years.

“Hopefully, with Politico first, and Axios today, we have shown a way for serious journalism to thrive in the digital era,” Mr. VandeHei said. “This country so desperately needs it.”

Axios’ next big test will be how its coverage of the upcoming midterm elections and the 2024 presidential election cycle stacks up against some of its deeper-pocketed competitors. Mr. VandeHei said the company planned to hire additional reporters for the campaign, noting that quality coverage was more about finding experienced journalists than having “a 100 boots on the ground.”

Mr. VandeHei said he remained sanguine about the prospects for the digital-media sector despite the turmoil afflicting the industry. He pointed to business-focused outlets like The Information and Morning Brew, which have cultivated loyal readers in a difficult market.

“The lesson of the digital era: Chase fads, fantasy and clicks, you fade or famish,” Mr. VandeHei said. “Chase a loyal audience with quality information, you can flourish.”
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Also see the story on axios.com by Sara Fischer headlined “Axios agrees to sell to Cox Enterprses for $525  million”:

Axios has signed a deal to sell to its most recent lead investor, Cox Enterprises, Inc., the companies announced Monday. The cash deal values the company at $525 million, according to sources familiar with the deal.

Why it matters: The deal is structured to ensure investments will continue to flow into local news at a time when most commercial investors have abandoned local markets.

  • Axios was founded in 2016 by the same leaders who built Politico, with a focus on politics, tech and business. In 2020, it began a significant expansion into local news.
  • Cox is a multi-generational, family-owned business that got its start in local newspapers. It wants to ensure local news remains a part of its legacy in the digital era.

“A big part of this investment is to expand the number of local markets we serve. Local watchdog journalism is so important to the health of any community, and no one is more focused on building that out nationally than Axios, “ Cox Chairman and CEO Alex Taylor said.

Details: The deal, which was signed Sunday, includes an additional new investment of $25 million in Axios’ media arm to help the company expand across its local, national and subscription news products.

  • Axios Local currently operates in 24 local cities, and plans to expand its coverage to 30 U.S. cities by the end of 2022. Eventually, it hopes to be in hundreds of cities.
  • Axios will spin off its software arm, Axios HQ, into a separate, standalone company led by Axios President Roy Schwartz.

“This is great for Axios, for our shareholders and American journalism. It allows us to think and operate generationally, with a like-minded partner – and build something great and durable that lives long after we are gone,” VandeHei said.

Deal terms: The deal values Axios at $525 million, the sources said. It has been reported that Axios projects it will reach $100 million in revenue for 2022.

  • Cox will control the board of Axios’ media arm with four board seats, and Axios’ three co-founders — Jim VandeHei, Mike Allen and Schwartz — will remain on Axios’ board.
  • Cox Chairman and CEO Alex Taylor will take one of the four board seats.
  • Axios will still control the board of Axios HQ, where Cox will have one of three board seats.
  • Axios’ management will maintain control of the company’s editorial direction and day-to-day operations. The deal is structured to incentivize Axios’ management and current employees to stay with the outlet and continue growing its business.
  • Axios HQ is being spun off with some seed capital, and plans to raise money early next year to fuel its growth as an independent firm. This year it will bring in roughly $6 million in annual recurring revenue. It has over 300 clients.

Be smart: Axios launched with a mission to deliver news to professionals in a simple format that helps them get smarter, faster across an array of topics, including politics, science, business, health, tech and media.

  • It was able to scale quickly by hiring subject-matter experts to write digestible newsletters on complicated topics.

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