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Posts Tagged ‘Michael Bloomberg’

Because you have been such supportive and loyal readers, today I’m going to give you a chance to make some money.

There’s a golden egg out there, and I want all my friends — personal and digital — to get a piece of it.

It’s called New York Times stock. (NYT on the New York Stock Exchange.)

Most of you have heard, I’m sure, about the two big newspaper sales the last week or so. Jeff Bezos, founder of Amazon, is buying the Washington Post for $250 million, and The Times announced last week that it will sell The Boston Globe and a couple of other properties for $70 million.

Now, The Times took a terrible loss on the sale of the New England Media Group, having bought The Globe and other New England newspaper properties for $1.1 BILLION in 1991. A real bath. However, The Times has been able to absorb that and other “strong headwinds,” as the stock analysts like to say, and it is standing strong today.

With the sale of the Post, The Times will be the last of the big, family controlled newspapers. The Ochs-Sulzberger family has owned or controlled the paper since 1896, and it continues to control the paper through a dual-class stock structure.

BRAZIL-MEDIA-IAPA-SULZBERGER

Arthur Ochs Sulzberger Jr.

Sale of the Post immediately raised the specter, in journalistic and business circles, of a potential sale of The New York Times Co. A company spokesman said as recently as yesterday that the family has no interest in selling the paper. The only slightly worrisome thing to me is that the company does not appear to have in place a clear-cut plan regarding who might succeed the fourth generation leader, 61-year-old Arthur Ochs Sulzberger Jr.

(As a side note, I don’t think that either of Sulzberger Jr.’s children, Annie Sulzberger and Arthur Gregg Sulzberger — who was The Times’ Kansas City correspondent a couple of years ago — is a likely candidate to take over. She’s not interested, and he didn’t strike me as if he’d be interested in becoming a titan of anything.)

But keeping in mind that a sale is always possible, here’s a little background that should help explain why owning (or buying) New York Times stock seems like a really good deal and potential moneymaker.

While the $250 million that Bezos is paying for the Post sounds like a steal, it is actually a handsome price, relative to other newspaper sales in recent years.

bezos

Jeff Bezos

On a Web site called Business Insider, reporter Jennifer Saba of Reuters said that Bezos may have paid more than four times what the Post’s financial results suggest the paper is worth.

Stick with me, now, as I dip into a little financial speak…Saba said the average sale of a metro U.S. newspaper has brought a valuation of 3 1/2 to 4 1/2  times earnings before interest, taxes depreciation and amortization (EBITDA).

Saba said a Morningstar analyst had estimated the Post had an EBITDA of $15 million last year, meaning that its realistic sale value was $59.5 million to $76.5 million. (That’s $17 million multiplied by 3 1/2 and 4 1/2).

Saba wrote:

Such a large premium, which essentially pays for intangible assets like the brand name, may mean that any future sellers of prestigious newspapers will raise their price expectations. Other major newspapers that are in the sights of potential buyers include the Los Angeles Times and the Chicago Tribune.

Analysts and bankers said that when it came to newspapers such as the Washington Post, the usual financial metrics did not apply. The price, as in the case of other trophy assets like sports teams, depended on what a buyer was willing to pay.

So, here’s the Washington Post, essentially a regional newspaper — albeit a great one with a remarkable history — selling for 17 times its 2012 EBITDA.

What does that mean for The New York Times, a national newspaper with the highest name identity of any newspaper and the best news-gathering team on earth?

Saba said that if The New York Times commanded a similar premium (17 times EBITDA), it could be worth nearly $5 billion. (The Times Co.’s current market value is $1.8 billion, she said.)

Yes, it’s a thicket of numbers and what-ifs, but here’s how I see it:

Times stock is selling at about $12 a share today. That’s up 49 percent over a year ago. In fairness, it’s also down 7.6 percent over the last five years. But I’m thinking about now and next year and the year after that. I’ve owned a significant amount of NYT stock for a couple of years, and after the sale of the Post, selling NYT stock is out of the question for me.

Just guessing here, but I think that if somebody like billionaire New York Mayor Michael Bloomberg went to Arthur Sulzberger saying he was interested in buying the paper, he’d have to start at about $20 a share just to get Sulzberger’s attention. Recall what Saba said: A trophy asset is worth whatever a buyer is willing to pay.

Let’s see, at $20 a share, that would be a 66 percent premium over today’s stock price of $12…That’s a 66 percent profit for stockholders, before taxes.

To appropriate a 1969 line from the Friends of Distinction, “Can you dig it?”

***

Editor’s note: Julius Karash, a good friend and former KC Star business reporter, sent me an e-mail today, putting the demise of the print-journalism business in perspective…He said:

“If you write something about the sale of the Washington Post and The Boston Globe, it might be interesting to note that Capital Cities Communications shelled out $125 million when it acquired The Kansas City Star Co. way back in 1977…According to a CPI (consumer price index) calculator I found at inflationdata.com, that would amount to $481.65 million in 2013 dollars.”

Today, The Star would be lucky to draw a bid of about $20 million, in my opinion.

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