By Russell Adams
Martha Stewart Living Omnimedia Inc. on Wednesday said it retained the investment firm Blackstone Advisory Partners to explore strategic partnerships, putting the media company founded by Ms. Stewart in play.
Executives said Blackstone will review and respond to parties that have approached it about partnering with or investing in the company, "as well as other opportunities." The company said there is no assurance the move will result in a partnership or transaction.
"Our enterprise value doesn't match the strength and power of the brand," said Charles Koppelman, the company's executive chairman and principal executive officer. "With Blackstone's assistance, we can take the brand to the next level."
Separately, the company said it hired Lisa Gersh, cofounder and former president of Oxygen Media, to be its president and chief operating officer, effective June 6. Ms. Gersh will become chief executive officer in the next 12 to 20 months.
Martha Stewart Living consists of three units: publishing, broadcasting and merchandising. Though the foundation of the company is the flagship Martha Stewart Living magazine, the chief source of profits are the deals the company signs to put its name on housewares, stationery and other merchandise sold at various retailers. The company's licensing business has become increasingly important as advertising declines battered the magazine industry, though the expiration last year of a lucrative merchandising agreement with Sears Holdings Corp.'s Kmart has hurt that business as well.
In the first quarter, the company posted a net loss of $7.1 million as revenue fell slightly to $52.7 million. For most of the past couple years, the stock has hovered around $5, down from the $20-$30 range it was trading at in the spring of 2005 when Ms. Stewart finished a prison sentence for lying to federal investigators about a stock sale.
Because of her conviction, Ms. Stewart was banned for five years from serving as an officer or director at her company. The company also announced Wednesday she will rejoin the board of directors in the third quarter of this year.
Ms. Stewart controls the company through her ownership of a special class of voting stock, so no strategic move could happen without her approval. Ms. Stewart said in an interview that she fully supports the move to explore partnerships and that she hopes any deal will help the company capitalize on the power of the brand in Asia and the Middle East. "Now it's time to expand in these places in our merchandising," she said.
The company's struggles in recent years have fueled speculation that Ms. Stewart would take the company private. Ms. Stewart and Mr. Koppelman declined to elaborate on what types of deals the company is willing to explore.
People familiar with the matter said Ms. Stewart is open to all options for her company, including a sale. One option could involve a sale to a private-equity firm in a deal that would allow her to maintain some level of control over the brand, one of the people said.
That person said prospective partners might see upside in the potential to rein in costs, which investors have long complained are out of alignment with the company's revenues. Shares of the company were up more than 30%, to $4.92 midday on Wednesday, putting the company's market capitalization at about $271 million.
The publishing business, which besides Martha Stewart Living also includes Everyday Food and Martha Stewart Weddings, has picked up recently after a difficult stretch in 2009. The number of ad pages in Martha Stewart Living increased 7% year-over-year in 2010 and 20% in the first quarter of 2011 compared to the year-ago period, according to the Publishers Information Bureau.
"We have an extremely strong core in our publishing business," Ms. Stewart said. "Publishing creates content for all the other businesses. That was the original plan, and it still is a very viable plan."
In the broadcast division, the company produces the talk show "The Martha Stewart Show" and other programming on the Hallmark Channel, including "Mad Hungry with Lucinda Scala Quinn" and "Petkeeping with Marc Morrone."
