Axios has signed a sale agreement to its latest lead investor, Cox Enterprises, the companies announced on Monday. The cash deal values the company at $525 million, according to people familiar with the matter.
Why is this important: The deal is structured to ensure that investment 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, technology and business. In 2020, it began a significant expansion into local news.
- Cox is a multi-generational family business that got its start in local newspapers. He wants to make sure local news remains part of his legacy in the digital age.
“Much 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 it nationally than Axios,” said Cox Chairman and CEO Alex Taylor.
Details: The deal, which was signed on Sunday, includes an additional $25 million new investment in Axios’ media arm to help the company expand its local, national and subscription news products.
- Axios Local currently operates in 24 cities and plans to expand its coverage to 30 US cities by the end of 2022. Eventually, it hopes to be present in hundreds of cities.
- Axios will transform its software arm, Axios HQ, into a separate, stand-alone company led by Axios President Roy Schwartz.
“It’s 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 big and enduring that will survive long after we’re gone,” said Axios CEO Jim VandeHei.
Terms of the offer: The deal values Axios at $525 million, the sources said. It has been reported that Axios expects it to hit $100 million in revenue for 2022.
- Cox will control Axios’ media arm board with four board seats, and the three Axios co-founders – VandeHei, Mike Allen and Schwartz – will remain on the Axios board.
- Taylor will fill one of four seats on the board.
- Axios will still control the Axios HQ board, where Cox will have one of three board seats.
- Axios management will retain control of the editorial direction and day-to-day operations of the business. The agreement is structured to incentivize current Axios management and employees to remain in the outlet and continue to grow its business.
- Axios HQ is being spun off with seed capital and expects to raise funds early next year to fuel its growth as an independent company. This year, it will bring in around $6 million in annual recurring revenue. It has more than 300 customers.
Be smart: Axios was launched with a mission to provide information to professionals in a simple format that helps them become smarter and faster on a range of topics including politics, science, business, health, technology and media.
- It was able to scale quickly by hiring subject matter experts to write digestible newsletters on complex topics.
- An Emmy-winning show on HBO and a television partnership with MSNBC helped Axios expand its notoriety across the country.
- Axios HQ launched in 2021 with a similar mission to help internal and external corporate communications departments communicate more effectively with their stakeholders through proprietary email publishing software.
By the numbers: Axios has raised $55 million, but because it has always been profitable, it still has a lot of that money on hand to continue investing in the business.
- Most of Axios’ revenue comes from high-level brand awareness advertising to large corporations through its 19 national newsletters, website and podcasts.
- It recently launched a professional news subscription, called Axios Pro, to provide investors and policy professionals with in-depth information about their sectors.
- Axios has over 500 employees, with nearly 100 working for Axios Headquarters and over 75 working for Axios Local. Axios HQ expects to more than double in size next year and triple its revenue.
Catch up fast: Axios was in talks to sell to German publishing giant Axel Springer last year, but that deal fell through under unusual circumstances.
- Cox sold a majority stake in its local television and radio business to private equity firm Apollo Global Management in 2019. The Atlanta-based company still owns The Atlanta-Journal Constitution.
The big picture: Axios is one of the few digital information startups to have sold over $500 million in enterprise value over the past decade.
- Politico, which the founders of Axios built and ran until 2015, sold for around $1 billion in 2021, a price that valued the company at around 5 times its annual revenue.
- The Athletic sold for $550 million to The New York Times earlier this year, around 8 times its annual revenue.
And after: The deal is expected to close in the coming weeks, following regulatory approvals.