The Forbes family's lawsuit against Integrated Whale Media Investments, a group of Asian investors that bought a controlling stake in Forbes Media, has “shed light on the Forbes family, who build their flagship publication into an arbiter for others' fortunes, but kept their own wealth a matter of conjectureâ¦,”
a
Financial Times
report noted.
The Forbes family's suit contends that Integrated Whale, which borrowed from the family to finance part of the deal, missed a $40,000 interest payment and eventually defaulted under the terms of the agreement. The sale of Forbes Media to Integrated Whale in 2014 was valued at $475 million, the article said.
The Forbes family “has long traded on its reputation for financial expertise,” the
FT
article said. “Now the family's complex dealings with Integrated Whale has placed its reputation — the underpinning for the Forbes brand — on the line.”
The
FT
estimated that $110 million could be at stake.
Elevation Partners, which bought a minority stake in Forbes Media in 2006, had an option to sell it back to the family a decade later. The family sought a new investor to avoid having to buy back the stake, but those they approached “balked at the $400m-plus pricetag for a business whose last earnings before interest, depreciation and amortisation were about $20m,” the report said.
Integrated Whale originally wanted to buy 80% of Forbes Media, but the family insisted it take the whole company; eventually, the parties agreed that Integrated Whale would acquire 80% in cash plus an additional 15% in a seller-financed structure. Integrated Whale insisted that the Forbes family keep 5% to preserve the brand's prestige, the
FT
report said.
Yam Tak Cheung, the Hong Kong financier who is Integrated Whale's controlling shareholder, “enjoys close ties to a casino owner known for lending to volatile small-cap firms in Hong Kong,” the report noted. “The question many observers are asking is why Forbes would sell its flagship product to a financier at the opaque end of Hong Kong's market? And why would it decide to lend money to do soâ¦?”
Citing Forbes' complaint in the lawsuit, the
FT
article said a company associated with Integrated Whale that had licensed the Forbes name since 2010 had fallen into arrears on licensing payments since 2014. “This means that at the time [Steve] Forbes was trumpeting the sale, his family was already owed overdue licensing payments by parties associated with Integrated Whale,” the article said.
Observers have speculated that the Forbes family wants to buy Forbes Media back, the
FT
article said. But, the report added, “It is unclear whether the Forbes family, which has been selling off prized assets for years, could finance such an investment.” The article said Steve Forbes spent $70 million of his own money running for president in 1996 and 2000. Media analyst Ken Doctor has estimated that the Forbes family received less than $10 million in cash from the deal with Integrated Whale, the article said.
“However, people close to Forbes say taking control of the group is not their goal,” the
FT
article said. “What they want is their money — and they have made clear they will go out of their way to get it back. But even if they do force the sale, the family may not be able to regain control of the Forbes name” because of licensing issues. (Source:
Financial Times
, Nov. 24, 2015.)
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