Amazon, DraftKings and more were interested in The Athletic before sale to New York Times

The co-founders of The Athletic are Adam Hansmann and Alex Mather.

The Athletic reached 1 million subscribers in September of 2020. Alex talked about what it would take to sell.

We don't know the upside of exit and we don't think about it. There are very few companies doing what we are doing. The New York Times is growing fast. We don't know what the ceiling is. Adam and I should have a chat when we feel like we know what our ceiling is. We haven't come close to having a conversation.

By March 2021, The Athletic was in talks to merge with another publication. The New York Times is in talks to buy The Athletic. CNBC has learned that interest from companies including Amazon, Conde Nast, DraftKings, and private-equity firm TPG Capital started after that.

The company needed a new capital injection after Mather and Hansmann changed their minds. The Athletic only brought in $73 million in revenue over the course of two years, as first reported by The Information. The Athletic has never been profitable.

The Athletic looked into raising more capital, but the cost of financing and the amount of dilution to the investors pushed them to sell, according to people familiar with the matter.

Several investors and advisers close to the company urged Mather and Hansmann not to sell, according to people familiar with the matter, who asked not to speak publicly because the discussions were private. This week there was a lot of confusion when Powerhouse Capital sent a letter to its limited partners acknowledging it didn't want The Athletic to sell.

According to a memo first reported by CNBC, the NY Times gets to build on the foundation of The Athletic platform, while we believe there is still more value to unlocked.

The following is a description of The Athletic's route to a sale. A person from The Athletic declined to speak.

People familiar with the thinking of The Athletic say that the ultimate plan was never to focus on sports. The people said that The Athletic contemplated merging with to combine sports and politics, as well as partnering with America's Test Kitchen to bring sports and food together.

People familiar with the matter say that the idea of merging was brought up by Axios in March of 2021. The two new journalism companies were focused on expanding their coverage.

One of the people said that The Athletic would have folded under the front facing company. The idea of the combined company going public via SPAC was hot at the time. Jim VandeHei was skeptical of SPACs. Both sides decided to walk away.

The New York Times approached The Athletic to buy the company after they became aware of their interest in merging. The talks broke down when the two sides couldn't agree on value. People familiar with the matter say the New York Times was offering $500 million. The Athletic raised capital at a valuation of $530 million in January 2020. The New York Times undervaluing The Athletic was felt by several people close to the company.

Liontree, a boutique media M&A bank, was chosen by The Athletic to evaluate potential sale options while also considering alternative funding. One of the people said that Liontree made a presentation to The Athletic estimating it could find buyers willing to pay between $500 million and $700 million.

People familiar with the matter say that Amazon, Conde Nast and DraftKings showed interest. One of the people said that Amazon was interested in broadcasting Thursday Night Football. synergies with its live game broadcasts could be provided by a well-trafficked sports landing page. People at Amazon, Conde Nast and DraftKings didn't respond to questions.

The companies never ended up as serious buyers after kicking the tires. The people said that the Times was the biggest challenger to buy The Athletic. Selling to a private equity firm would have been difficult because employees may be concerned about losing their jobs, two of the people said. A person at the company declined to speak.

The New York Times was not invited to participate in the new auction because of its previous talks. The Chief Executive returned to the table. As it became clear The Times would only have to raise its initial offer by 10%, a deal came together. Hansmann and Mather agreed to the sale because of the company's journalistic reputation and potentially unattractive terms around raising more capital.

One of the largest exits in the history of digital media was achieved by the company. The idea of a national subscription sports journalism product with a focus on in-depth local reporting and analysis was turned into a $550 million entity by two founders. According to research firm CB Insights, The Athletic got a good price for a company with less than $50 million in revenue.

The New York Times is a perfect fit for a sports journalism site that is known for its quality journalism, supporters say. The New York Times and The Athletic want to grow. The New York Times takes more pride in its journalists than The Athletic does. The New York Time has already made itself a leader in those areas, as The Athletic wants to expand into podcasts and digital video.

The Athletic sold its vision short by selling now, according to skeptics of the deal. It could still be a separate entity within The New York Times. New York Times shareholders will see the value gain if it happens.