Mathias Döpfner Finds Himself in an Enviable Position. What Next?

By Jacob Cohen Donnelly • September 20, 2024

Axel Springer CEO Mathias Döpfner has done it. Five years ago, with the help of KKR, he took Axel Springer private. But now? Axel Springer announced on Thursday that it and KKR would split the classifieds business from its media operations.

According to the Wall Street Journal:

Döpfner and supervisory board Vice Chairwoman Friede Springer will assume control of its media assets, including Politico, Business Insider and German news publishers Bild and Die Welt, which will likely be valued around 3.4 billion euros, equivalent to $3.78 billion, according to people familiar with the matter. KKR will take the classified assets that include Aviv and StepStone, with Axel Springer retaining a minority stake. That business will likely be valued around €9.9 billion.

Axel Springer said a final agreement is expected in the coming months, and that the transaction is expected to close in the second quarter of 2025 subject to regulatory approvals.

It’s a big deal for a slew of reasons. First, Döpfner and Springer will now own close to 98% of the company, with Axel Sven Springer, a grandson of the founder, holding the remaining shares. The classifieds business, which includes the Stepstone Group, will move into a new joint venture with KKR and the Canadian Pension Plan holding a majority of the shares; Axel will retain a minority position.

Second, Axel Springer will now be entirely private, with its CEO owning nearly half of the company. In addition, it will carry zero debt on the books. This is significant because media requires patience. It takes time to develop brands, build an audience, and achieve the long-term success everyone wants. Being private without debt means the firm can move at its own pace. And being family-owned only compounds that. As I wrote last year:

Running a media business is a muscle. It gets stronger with time. But if you’re constantly changing what you do—pivot to lists, pivot to video, pivot to affiliate, pivot to social, pivot, pivot, pivot—you’re never going to build the muscle of excellence required to have a lasting brand. Gimmicks are easy; longevity is not.

Ultimately, it’s about time horizon. If you can take time to execute, you’ll likely build a lasting brand. My suspicion is that, as media companies stop trying to achieve massive scale and, instead, focus on tighter niches, we’ll see more of these scenarios play out.

This is an enviable position to be in. To have gone from a public company to a private one with private equity backing, and then for management to effectively buy all the media assets with the classifieds as the currency is a coup. And the brands are strong. Here in the United States, Politico remains one of the best media properties out there. In Germany, Bild is the largest newspaper. In 2023, the media businesses generated about $2.14 billion in revenue. That’s a big business.

But let’s fast forward to the second quarter of 2025 and assume that this deal goes through. What comes next? Dylan Byers from Puck reported on couple of ideas:

In any event, establishing a new global media empire is a tall order. This deal will finally empower Mathias to operate a debt-free company with high cash flow (thanks in no small part to Politico), but it’s unclear what the new structure will mean for new investment and M&A opportunities. There’s been speculation that he’d make a play for the Journal—though it’s not at all clear how or where he’d get the financing, and highly implausible that the Murdochs would sell—and it’s also possible he could take another swing at FT. As I reported this summer, some Nikkei board members have grown impatient with FT’s performance and are pushing for consideration of a sale. Axel would be a natural home. We shall see.

Let’s start with the Financial Times. Byers originally reported this speculation over the summer, quoting three sources. One went so far as to say that the FT “never really met expectations.” Nikkei adamantly denied it. According to The Times (in London):

Responding to the claims, Nikkei said: “The article by Mr Byers is completely baseless.” A spokeswoman for the FT said: “The Puck speculation is totally untrue.”

According to the FT’s Companies House filings, in 2022, it generated £422.5 million, or $561 million in revenue with an operating profit of £13.4 million, or ~$17.8 million. We won’t know its 2023 financials until next week. It’s hard to say what meeting expectations is, but in 2015, it generated £285.3 million in revenue, or $436.5 million at a 2015 conversion rate, with a £132.9 million operating loss, or $203.3 million.

So, meets expectations? Revenue is up, it’s not burning cash. Maybe that’s not enough. If the Financial Times were to come for sale, it would likely trade for a premium, especially since it’s now profitable versus burning cash. That could be difficult for Axel Springer to finance due to its new valuation. According to WSJ, Axel Springer will be worth $3.78 billion. Nikkei originally paid $1.3 billion for the FT. I suspect the cost to buy it now would be more than half Axel’s valuation.

Debt exists and Axel could borrow the money. But does the FT generate enough cash to service that debt? With an operating margin of only 3.2%, there’s not a lot of wiggle room.

And the problem is even worse for The Wall Street Journal considering it makes a ton more money. Dow Jones, collectively, generated $2.2 billion in revenue in its fiscal 2024 year with $532 million in EBITDA. Now, there are multiple parts of Dow Jones, including its high margin B2B business, so finding its revenue is impossible. However, we can estimate.

According to the FT, it has over 1.25 million paying subscribers. The Wall Street Journal has 4.3 million. That’s 3.44x bigger than the FT. Since both businesses derive the bulk of their money from subscriptions, WSJ generates clear over $1 billion a year in revenue. And I suspect its profit margins are also higher.

Suffice it to say, Axel Springer would need to sell a large chunk of its portfolio—potentially including Politico—to get a crack at buying The Wall Street Journal.

One thing I will say is that the implausibility of Axel getting a chance to make a bid on WSJ is not as high as one might say. We wrote about the Starboard Value shareholder resolution to get rid of the News Corp dual class shares. If that were to go through, the Murdochs would have no choice but to entertain deals for WSJ.

These are just two of the many possibilities that Axel Springer could embark on. It could also decide to simply wait, continue its process of getting the European business to be far more digital, and then make targeted M&A deals from there. We know that Döpfner wants a pedigree brand. FT and WSJ are those brands. Whether he can get them remains to be seen.