Washington Redskins owner Daniel Snyder is considering selling his Bethesda marketing company, Snyder Communications Inc., the 12-year-old firm whose rapid growth bankrolled his emergence as a multimillionaire sports franchise owner.
Snyder and other company directors yesterday authorized the investment firm Deutsche Banc Alex. Brown to seek out offers for Snyder Communications, the company confirmed.
The move was triggered by a recent offer from an undisclosed advertising agency to buy Snyder Communications for about $25 a share, or $1.8 billion, according to investment banking sources close to the company.
Snyder's response to the initial overture may reflect a frustration with his company's disappointing performance in the stock market this year, financial analysts said, as well as his increasing involvement with the Redskins as the team battles for its first playoff appearance since the Joe Gibbs era.
In an interview yesterday, Snyder would not discuss his company's future. The businesses "are doing well, but I can't comment on speculation," he said. Three months ago Snyder restructured his company in an attempt to rally its stock price, which lost two-thirds of its value from April 1998 to last week.
Snyder spun off its health-care marketing division, which assists drug manufacturers' sales of new medications, into a separate company, Ventiv Health Inc. He also bundled the firm's Internet services into a subsidiary called Circle.com with its own stock. The company was on track to reach $1 billion in annual revenue before these changes.
The strategy did not click with Wall Street, however. Professional investors who had climbed aboard when Snyder was buying other advertising and marketing firms in 1997 and 1998 turned away last summer after the acquisitions stopped. Although revenue continued to increase, by mid-October the company's stock was down to less than $10 a share, a painful setback for Snyder, who owns 9.4 million shares of his company's stock. Part of the lower price reflected the spinoff of the health-care unit.
"I think they're frustrated with the valuation," said John P. Larson, a financial analyst at B.C. Ziegler & Co. in Milwaukee.
The company's stock, which had been trading at less than $13 a share last week on the New York Stock Exchange, began rising this week, and yesterday climbed more than $3 a share to $19 after the company confirmed it was seeking offers.
Some people close to the company said yesterday that Snyder has not given up hope for his reorganization plan and has been confident the stock price would move up. But an investment banking source in touch with the company said Snyder was "very frustrated" with the stock market's disinterest. "Look at how he's dealt with the Redskins. He doesn't like public failure at anything," the source said. "He's ready to move on."
In addition to spinning off the health-care division and giving a separate identity to its Circle.com Internet division, Snyder recently put the company's $37 million teleservices business up for sale.
Snyder Communications' direct-marketing unit is the world's largest and its Boston-based advertising division, Arnold Communications, has a list of clients that competitors would covet, analysts said.
"I don't think he's turned his back on his company at all," Larson said. But he has turned the company's operations over to executives at the companies he acquired, Larson added. "He expects a lot of them, but he puts them in charge."
Chris Hansen, an analyst with Banc of America Securities, said: "Those units are running themselves. Dan is more of a strategic adviser."
Snyder, meanwhile, has made no secret of his increasing involvement with the football team he has followed since his youth in Bethesda.
If he were to sell his holdings in Snyder Communications for $25 a share or more, he would receive at least $250 million, probably in stock of the purchasing company, analysts said. Snyder recently refinanced nearly $350 million in loans used to buy the team, and the Redskins franchise does not face immediate cash needs, analysts said.
Snyder has agreed to buy for an undisclosed price the 15 percent minority interest in the Redskins held by his business partner, real estate developer Mortimer Zuckerman. Snyder and members of his family--his father, Gerald, and his sister, Michele--own about 70 percent of the team, bought for a record $800 million, while minority partner Fred Drasner owns about 15 percent. Zuckerman and Drasner, whose financial help launched Snyder's business career a dozen years ago, are major shareholders of Snyder Communications.
Snyder agreed yesterday that his interest in the team has "intensified," as a glimpse of his emotional reaction to the Redskins' fortunes from within the owner's box underscores. In an interview two weeks ago, he said he loved owning the team. "I'm totally involved and want it to work. It's the best thing I've ever done. I love the challenge and I promise I'll get this right."
Staff writer George Solomon contributed to this report.