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New York Times Set to Lose 90 Percent on Sale of Boston Globe

Wednesday, 26 June 2013 08:52 PM

New York Times Co., which is accepting bids for the Boston Globe Thursday, is likely to fetch a price that’s about a 10th of what it paid in 1993, a sign of the industry’s deterioration over the past two decades.

The bids are set to be in the range of $100 million, according to three people who asked not to be identified because the matter is private. The potential buyers include Rick Daniels, a former president of the Globe, and former Time Inc. CEO Jack Griffin, in partnership with cousins Steven and Ben Taylor, whose family once owned the newspaper, the people said.

Times Co. put the Boston Globe up for sale in February and hired Evercore Partners Inc. to manage the process, part of an effort to focus on its flagship New York Times media brand. The deal will include the Worcester Telegram & Gazette and a growing printing business.

The New York-based company, which bought the Globe for $1.1 billion 20 years ago, mostly in stock, is coping with an industrywide decline in advertising that has caused a drop in sales and stock prices. Its market capitalization has fallen 19 percent since the Globe acquisition, to about $1.6 billion, after reaching more than $8 billion in 1999.

Eileen Murphy, a spokeswoman for Times Co., didn’t respond to a request for comment.

The discussions have been hampered by disagreements with bidders over what contingencies to attach to a deal, said the people. At issue is whether to fold in a portion of the pension liability as part of the offers and how to value other parts of the Globe’s balance sheet, said the people. Two potential bidders are considering including part of the pension liability in their offer, meaning a $100 million bid would likely include a lower cash amount, two of the people said.

Pension Liabilities

The New England Media Group, the division that manages the Globe, has about $110 million in pension liabilities, according to two of the people familiar with the matter. Times Co. would prefer cash to help offset the liabilities rather than bids that assume even part of them, one of the people said. Such bids would be less attractive because in the event a new owner of the Globe were to become insolvent, the Globe’s pension liabilities would revert back to Times Co., the people said.

Unsolicited Bid

The group also has commercial real estate valued at about $50 million and annual earnings before interest depreciation and amortization of around $20 million, according to these people. The unit that owns the Boston Globe had $394.7 million in sales last year, a 44 percent decline since 2004.

The publisher, controlled by the Ochs-Sulzberger family, has been working on a plan to sell the Globe since 2012 when it received an unsolicited bid from Daniels, the former Globe president, along with Heberden Ryan, a managing director of private equity firm Boston Post Partners LLC, according to one of the people. While their bid was about $100 million, it included contingencies that made it less attractive, the person said. Ryan didn’t respond to phone and e-mail requests for comment.

Times Co. has rebuffed proposals that exceeded $100 million. In 2011, Freedom Communications Inc. CEO Aaron Kushner, publisher of the Orange County Register and other California papers, offered more than $300 million, according to another person familiar with the deal who asked not to be identified because the matter was private. His offer included the assumption of both qualified and unqualified pensions. Times Co. turned down the offer because it didn’t include enough cash up front, according to another person, who also requested not to be named because the talks weren’t public.

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New York Times Co., which is accepting bids for the Boston Globe Thursday, is likely to fetch a price that's about a 10th of what it paid in 1993, a sign of the industry's deterioration over the past two decades.
Wednesday, 26 June 2013 08:52 PM
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