The cash-strapped New York Times Company (NYT) is trying to sell the Boston Globe, which it bought for $1.1 billion in 1993.
But if the Times were to take the best offer on the table we know about, it would have to sell the paper for about $94 million.
That offer comes from California private equity firm Platinum Equity, which, according to the LA Times, offered to pay $35 million and assume $59 million in liabilities.
Jim Barnett, from Harvard University’s Neiman Journalism Lab says the offer might be low enough for the Times to actually consider hanging on the Globe for the same reason he’s hanging onto his 1996 Honda Civic.
I drive a 1996 Honda Civic, and I love it. Why? It costs me virtually nothing. It gets 30 m.p.g., we paid it off years ago, and I carry no collision coverage. I could sell it, but I won’t. It’s running great, and it probably will last several more years.
If I were at the NYT Co., I’d feel a bit insulted [by Platinum Equity’s offer] — and I’d start looking at the Globe the same way I look at my Honda. Sure, I could sell it for a couple thousand dollars. But it’s worth more than that to me, even in its depreciated, degraded state.
So here’s the question: What would it take for the Globe to generate profits that would be worth $94 million in today’s dollars? A scenario based on data from the NYT’s most recent 10-K report might help us see the Globe from the NYT Co.’s point of view in purely financial terms.
Let’s assume the worst — that Globe/NEMG revenues, which were $523 million in 2008, continue dropping 12 per cent per year, and that the cost of capital comes at a usurious Carlos Slim rate of 12 per cent per year. And let’s assume a short-run time frame of five years. Even then, the Globe would have to eke out a relatively meager profit of less than 8 per cent per year to do better than the Platinum bid.
Would that require more cost cutting? Probably. But the cuts almost certainly would be kinder than anything Platinum would impose. Suddenly, if I’m at the NYT Co., keeping the Globe doesn’t seem like such a bad option — which is probably what the folks at Cox decided recently when they pulled the Austin American-Statesman from the auction block.
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