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Tuesday, November 28, 2023

Sale of Forbes to group led by tech investor collapses

An $800 million deal to sell Forbes Media Group to a group of investors led by American tech executive Austin Russell, the 28-year-old founder of Luminar, has collapsed after questions were raised about potential Russian or other foreign influence in the acquisition.

The current owner of the U.S. media group, Integrated Whale Media, said Tuesday it was terminating its agreement to sell Forbes to the Russell-led group, which “couldn’t deliver on closing,” according to Bill Hankes, a Forbes spokesperson who declined to comment further.

The announcement follows months of controversy over the sale, which drew criticism on Capitol Hill and scrutiny by the Committee on Foreign Investment in the United States over possible foreign involvement, according to two people familiar with the matter.

Russell had scrambled over the summer to raise funds for the deal from U.S. investors even as he maintained ties to foreign backers, according to people who worked on the acquisition. In a statement Tuesday, Russell said “it was determined that it was in the best interest of the parties that the contract be terminated.”

Russell’s bid to acquire Forbes, first announced in May, had raised eyebrows because he had no background in the media industry and because of the price tag, more than the combined sale price of Time, Fortune and The Washington Post. The potential deal was also dogged by questions over Russell’s connections to a Kremlin-linked tycoon, Magomed Musaev, who in 2016 had helped land a $20 million seed investment in Russell’s then-fledgling lidar technology company, according to court documents, and became the company’s second-biggest outside shareholder.

Russian tycoon claims he is behind Forbes purchase, audiotapes show

In five audio recordings obtained by The Post, Musaev, who also holds the license to publish the Russian-language edition of Forbes, had claimed he was the buyer of Forbes. In a separate video recording reviewed by The Post, Musaev had described Russell as the “face” of the deal while insisting his own involvement be kept quiet.

Russell had denied any involvement by Musaev or any Russian individuals in the purchase, while Musaev told The Post he had no investment in the transaction and had no plans to do so.

In an Aug. 9 letter, Sens. Tom Cotton (R-Ark.) and Marco Rubio (R-Fla.) had called on Treasury Secretary Janet L. Yellen — who chairs CFIUS — to review the deal, claiming that Russell was “masquerading as the lead buyer” while “it is evident that Russell is merely a conduit for larger foreign investors.”

In September, a company created by Russell to make the Forbes purchase sent out a news release saying the $800 million transaction already had attracted “over $2 billion of demand,” mostly from American investors. But representatives for Russell said they could not say how much he or any of the other deal participants were investing, saying he was legally bound not to disclose exact terms before the deal closed.

And written communications seen by The Post appeared to show that in the days after the September news release Russell’s team was still trying to raise substantial amounts of financing.

In a memo to staff, Forbes CEO Mike Federle said the cancellation did not affect “day-to-day operations or business goals.”

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