Martha Stewart Living Death Watch

Martha Stewart Living  Omnimedia (NYSE: MSO) has retained Blackstone to consider strategic options for the company founded by the diva of good taste. “Strategic options” is usually another way to say the firm is for sale. The news pushed Martha Stewart shares up 20%.  The company’s stock still trades below its 52-week high of $6.25. Shares closed at $4.67 yesterday. That means the market value of Martha Stewart is $257 million, expensive for a media operation which had revenue of $52.7 million in the first quarter and a net loss of $7.1 million. Martha Stewart only had $23 million in cash at the end of the period.

Martha Stewart the person wants to become more involved with Martha Stewart the company, at least for the time being. She will rejoin the board of directors after a five year ban set by the government when she was convicted of lying to government investigators about stock sales. Some observers think it is good that the company’s creator will take more active role in the corporation. That may not be true for a potential buyer.

Martha Stewart is not Martha Stewart without its founder. Any M&A transaction has to take that into account just as a possible buyer of TheStreet.com (NYSE: TST) would have to consider the future of co-founder Jim Cramer. Cramer in more visible than the media company. Its value partially, and perhaps mostly, disappears without him.

Stewart is 70 years old. She may live to 90 or 100. There is no assurance she will want to spend most of those years making TV appearances, writing books, talking on the radio, and contributing to her magazine. In other words, Martha Stewart could disappear, one way or another. The company is not worthless without her, but is nearly so.

Douglas A. McIntyre