Forbes Embraces, Keeps Distance From China With Sale

Fosun fails in bid for Forbes

More than half a year after putting itself up for sale, US publishing giant Forbes Media has found a suitor in a group with strong China ties even though none of its members are actually Chinese. The announcement comes as a slight surprise because Fosun International (HKEx: 656), one of China’s biggest private equity firms, had been rumored as a frontrunner in the bidding for the US publishing giant. Some media are saying that price was the determining factor in the end, as Fosun may have been unwilling to pay the high premium that Forbes wanted. But the stigma of potential ownership by a Chinese company may have also influenced the final decision by Forbes, which wants to maintain its independent image while also staying active in the China market.

At the end of the day, I do think that Fosun was smart for walking away from this deal, which was first rumored late last year. (previous post) Reports at that time said that 6 parties were bidding for Forbes, including Fosun, as well as Germany’s Axel Springer. Forbes certainly has one of the strongest brands in the financial media sector, leading earlier reports to say the company was likely to fetch a price of about $400 million. But the company is also in a dying industry where traditional publishers are seeing their advertising revenue plummet as they get challenged by a new generation of Internet- and mobile-based rivals.

The ultimate winning bidder for Forbes was Integrated Whale Media Investments, a group that was one of the 6 names in the earlier reports. (English article) Whale will purchase a majority of Forbes, which also organizes events and provides other services in addition to its core media products. The Forbes family will retain a significant stake in the company, and one report says that stake will be around 20 percent. The same report says the deal values Forbes Media at about $475 million.

All that said, let’s take a closer look at the new ownership group, which has strong ties all around China’s periphery without any actual owner based in the Chinese mainland. The buyer group is anchored by a Hong Kong company called Integrated Asset Management, which was founded by Hong Kong investor Tak Cheung Yam. One other significant investor is Wayne Hsieh, co-founder of Taiwanese PC giant Asustek (Taipei: 2357).

Reports say many of the initial interested parties walked away from the deal due to tough conditions that Forbes was seeking, including a continued strong role for the Forbes family. The final buyer’s Asian background reflects the fact that the company still enjoys a strong brand out here in Asia, including in China where it was one of the first major financial publications to launch a Chinese language site for mainland readers.

At the end of the day, Fosun probably walked away from this deal mostly for the same reason as others, namely because the Forbes family wanted too much money and imposed too many other conditions. But that said, both Forbes and Fosun were also probably well aware of the negative publicity that their marriage would have generated.

Such a deal would have inevitably drawn criticism from US politicians and conservatives, who would have talked up the potential of a conspiracy by Beijing to turn Forbes into a propaganda machine. At the same time, having a Chinese owner surely would have hurt Forbes reputation for independence, even though Fosun is a private company. Perhaps Fosun may still try to get involved through a lower profile backdoor relationship with the new buyer, which already has many China ties. But at least for now, its decision to bow out of this deal looks like a smart one both for political and financial reasons.

Bottom line: Fosun’s decision to abandon a bid for Forbes was most likely driven by a combination of financial and political factors, though it could still seek a backdoor route to invest in the company.

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