The Sulzbergers Will Have To Sell The New York Times

Martin Peers of the Wall Street Journal assesses the New York Times and basically concludes three things:

  • The stock is worthless.  At best, the company will throw off $50-$60 million of cash a year, and even if you put a 10X multiple on that it’s still worth less than the company’s $1 billion in debt (and that ignores the pension and retirement obligations).  This is a fair analysis.  What would make it wrong is an aggressive takeover bid or more radical cost-cutting.
  • Buying the stock–as David Geffen is said to be considering doing–is silly, because the bondholders and, for now, the Sulzbergers control the place.  You’re better off buying the bonds, which are trading at 70 cents on the dollar, because then you’ll have a seat at the table with Carlos.
  • The NYT will likely have to raise more cash over the next couple of years, and, to do so, the Sulzbergers will likely have to give up their voting control.  Both are probably true.  Unless the NYT gets much more aggressive about cost-cutting or ad sales suddenly stabilise, the company will likely need more money.  And it would, in fact, be reasonable for an investor (debt or equity) to demand some direct control over the place.

Bottom line: Even if the Sulzbergers still don’t want to sell the paper, they may have to give up control to save it.

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