Credit…Jared Soares for The New York Times
Axios, the digital media company that quickly gained traction since its founding five years ago with its distinctive types of newsletters in the fields of politics, business and technology, he said on Monday which had agreed to sell itself to Cox Enterprises.
The deal, which is set to close this month, values Axios at $525 million, according to two people with knowledge of the deal.
The agreement is structured so that the three founders of the company: Jim VandeHei, the CEO; Roy Schwartz, the president; and Mike Allen, a journalist, have financial incentives to stay with the company. Each will be a minority shareholder and will continue to make day-to-day business and editorial decisions. Alex Taylor, the CEO and chairman of Cox Enterprises, will join Axios’ board.
Axios became one of the Beltway outlets shortly after its founding in 2017, with readers devouring stories about President Donald J. Trump and his administration. Jonathan Swan, Axios’ national political correspondent, drew attention for his on-camera meetings with Mr. Trump and White House officials, and the newsletters of reporters like Dan Primack and Sara Fischer caught the attention of the business community.
The deal offers some hope for the digital publishing industry, which has been fraught with difficulties for investors and operators over the past decade. Some of Axios’ peers have struggled to go public, sell or raise funds at favorable valuations as investors have cooled on digital advertising, a market dominated by tech giants such as Google, Meta and Amazon.
Axios is selling for about five times its projected 2022 revenue of more than $100 million, according to a person with knowledge of a presentation Axios made to its board. The company was profitable for the past three years but is not expected to be profitable in 2022, in part because of investments in HQ, its communications software division, the person said.
In an interview, Mr. VandeHei said the company’s founders had decided to sell now because they found a buyer committed to journalism and would pay a fair price, allowing investors who backed Axios earlier, such as NBCUniversal and Emerson Collective, to receive a substantial return.
Mr. VandeHei said it was also important to him that any deal allowed the management team to remain in place, because he had no plans to step aside anytime soon.
“Not a chance,” he said. “This is my life’s work. It’s my passion. I’d do it for free.”
The deal provides something of a coda for Axios’ founders, who left Politico in 2016 amid a protracted war over that company’s future, which Mr. VandeHei also helped found. He, Mr. Allen and Mr. Schwartz started Axios the following year. Politico was sold last year to German publishing conglomerate Axel Springer for $1 billion.
The price of the deal exceeds the roughly $400 million valuation that Axios discussed with Axel Springer last year, according to three people familiar with the matter. After those talks, Axios raised another round of funding, led by Cox, which valued the company at $430 million.
Cox Enterprises is not buying HQ, which Axios is spinning off into a separate company. Mr. Schwartz will be the CEO of this company and Cox will take a minority stake, with Mr. VandeHei as chairman, a person with knowledge of the deal said.
The deal to acquire Axios traces back to the media roots of Cox Enterprises, a privately held family-owned company based in Atlanta that generates most of its revenue from its cable and broadband businesses. The company traces its beginnings to 1898, when James Middleton Cox purchased what is now The Dayton Daily News for $26,000. In 1939, Mr. Cox bought the paper that would eventually become The Atlanta Journal-Constitution, and the company still owns both publications.
“It’s a big part of who we are and what we do,” said Mr. Taylor. “We’ve been in the news business for 124 years, and that speaks to the legacy our grandparents left us.”
Cox Enterprises, which already had a minority stake in Axios, is putting $25 million in cash on its balance sheet to fund the company’s growth. Mr. VandeHei said Axios plans to build a series of subscription products, similar to those offered by Politico Pro, on topics such as technology, politics and legislative policy.
Axios also plans to continue launching more regional editions, which already exist in 24 cities, including Philadelphia, Des Moines and Nashville. Mr. VandeHei said the company aims to be in at least 100 cities in the next few years.
“Hopefully, with Politico first and Axios today, we’ve shown a way for serious journalism to thrive in the digital age,” Mr. VandeHey. “This country desperately needs it.”
Axios’ next big test will be how its coverage of the midterm elections and the 2024 presidential election cycle compares to some of its more in-depth competitors. Mr. VandeHei said the company planned to hire additional reporters for the campaign, noting that quality coverage was more about finding experienced reporters than having “100 boots on the ground.”
Mr. VandeHei said he remained optimistic about the outlook for the digital media industry despite the turbulence affecting the industry. He pointed to business-focused outlets like The Information and Morning Brew, which have cultivated loyal readers in a tough market.
“The lesson of the digital age: chase fads, fantasy and clicks, you fade or you starve,” said Mr. VandeHey. “Go after a loyal audience with quality information, you can thrive.”