NYT Stock: The New York Times Doesn’t Need Rescuing … By Anyone

Advertisement

Every few months, a rumor surfaces that some billionaire (Michael Bloomberg is the latest) is going to run to the rescue of the New York Times Co (NYSE:NYT) and restore the Grey Lady to her former glory. But the rumors ignore the fact that the Sulzberger family that controls NYT doesn’t want to sell — at least that’s the contention of Chairman Arthur Sulzberger, who has been asked the same question for more than a decade.

the-new-york-times-co-stock-nytSulzberger doesn’t need to sell to anybody. His family controls the company by holding 90% of Class B NYT stock, which is not publicly traded. But as the newspaper industry weakened and the company’s debts mounted during the recession, the Sulzbergers have paid a high price for their freedom.

In 2009, NYT borrowed $250 million at the credit card like-interest rate of 14% from Mexican billionaire Carlos Slim. NYT paid Slim back in 2011, ahead of schedule, but as a result of the transaction Slim got warrants to buy stock and now is the company’s largest shareholder, holding more than 16% of Class A NYT stock.

NYT also has divested itself of several assets in recent years, including its interest in baseball’s Boston Red Sox; its broadcast media group; a group of more than a dozen southern and California publications that made up its regional newspaper group; and  its New England Media Group, which included The Boston Globe and the Telegram & Gazette of Worcester, Massachusetts.

NYT stock has been on a roll since the start of the year, gaining more than 7%, outperforming Tribune Publishing Co (NYSE:TPUB) and nearly matching Rupert Murdoch’s newspaper empire, News Corp (NASDAQ:NWSA), which has shot up 15% this month. But NYT stock has an insane valuation, trading at a price-to-earning ratio of about 67, and should be avoided.

Potential NYT shareholders aren’t going to get as sweet a deal as Slim. Besides, Slim isn’t going to buy the company because there is no point given the huge headaches that would come from owning NYT.

Moreover, there is no obvious synergy between the NYT and Slim’s telecommunications assets. Then again, the same can be said for Bloomberg. As I have said before, buying The New York Times won’t sell a single subscription terminal. Moreover, integrating the NYT’s news operations into Bloomberg L.P. would be a huge hassle and wouldn’t be without layoffs.

Bloomberg, the former mayor of New York, is a motivated buyer. Whether he’s being moved by ego, altruism or a little bit of both is hard to say. But he is a typical example of a new breed of media owner — a rich man who wants to have something to talk about at cocktail parties. He’s got to be so rich that he doesn’t worry about “trivial” concerns such profits. Amazon.com, Inc. (NASDAQ:AMZN) founder Jeff Bezos’ purchase of the Washington Post comes to mind.

But like I said, the NYT doesn’t need to be rescued.

Of course, its results aren’t great but they are good enough to keep the lights on and the presses humming. During the latest quarter net income at the NYT fell 47% to $37.9 million, or 23 cents per share, while revenue was flat at $444.7 million as gains in circulation revenue helped offset drop offs in advertising. NYT’s cash position, which was $981 million as of the end of last year, is fine and its total capital debt and capital lease obligations of $650.1 million is reasonable.

Of course, everything is for sale at the right price. The Bancroft family controlled the Wall Street Journal for years until Murdoch made an insane $5 billion offer for the paper’s parent company, Dow Jones & Co., in 2007, offering more than a 60% premium.

That was enough to encourage enough of the Bancrofts to cash out.

The Sulzbergers are much more actively involved with NYT than the Bancrofts were with Dow Jones. Arthur Sulzberger is also the publisher of the newspapers, a position his father and grandfather also held. This is insane from a governance standpoint because the publisher reports to CEO Mark Thompson, who reports to Sulzberger, the company’s chairman. But it’s their company to do with what they please.

Whether investors in NYT stock benefit from their decisions doesn’t seem to be a major issue.

As of this writing, Jonathan Berr did not hold a position in any of the aforementioned securities.

More From InvestorPlace

Jonathan Berr is an award-winning freelance journalist who has focused on business news since 1997. He’s luckier with his investments than his beloved yet underachieving Philadelphia sports teams.


Article printed from InvestorPlace Media, https://investorplace.com/2015/02/nyt-stock-the-new-york-times-doesnt-need-rescuing-by-anyone/.

©2024 InvestorPlace Media, LLC