Billionaire Carlos Slim plans to exercise warrants by the end of the year that will more than double his stake in the New York Times Co. to as much as 19 percent, a person with knowledge of the matter said.
Slim, the world’s second-richest person according to data compiled by Bloomberg, owns stock warrants giving him the right to buy 15.9 million Times Co. shares at $6.36 apiece, less than half their market value as of today’s close. Once he exercises the warrants, he intends to hold on to the expanded stake rather than sell shares for an immediate profit, said the person, who asked not to be identified because the information is private.
Slim’s bet on the Times is paying off, with the 74-year-old billionaire poised to double his money. He has bided his time since obtaining the warrants in 2009 as part of a deal to loan the publisher $250 million in the midst of the global financial crisis. Adding to his stake would be a vote of confidence in the management of the company, which has sold assets and started charging for digital access to combat 13 straight quarters of declining ad revenue.
Slim is already the publisher’s second-largest shareholder, with an 8 percent stake. Exercising the warrants, which doesn’t add to the company’s outstanding shares, would boost his ownership to as much as 19 percent.
A spokesman in Slim’s press office declined to comment, as did Eileen Murphy, a Times Co. spokeswoman.
The Times is protected from unwanted takeover attempts because the company’s controlling owners, the Ochs-Sulzberger family, hold voting shares that give them a firm grip on board seats. Slim’s stake only allows him to vote for Class A directors, a group that represents no more than a third of the company’s board seats. The Ochs-Sulzberger family’s Class B shares let it elect the remaining two-thirds of the board, giving it effective control. Class B shares aren’t publicly traded.
Slim’s warrants are worth $131 million based on today’s close of $14.62 and the exercise price of $6.36. The billionaire has until Jan. 15, 2015, to use them. His current stake of 11.9 million shares is worth $174 million. Times Co. has a total market value of about $2.2 billion.
The 162-year-old Times is in the process of a turnaround as it becomes more reliant on readers than on advertisers for revenue. Times Co. shares hit a five-year closing high of $16.09 at the end of last year as the publisher moved to a digital-subscription strategy that charges readers for online access. The company has also cut costs and brought in British Broadcasting Corp.’s Mark Thompson as its new chief executive officer.
Even leaving out the warrants, Slim has booked a profit from his loan to the newspaper. The Times paid Slim back in 2011, including a 12 percent premium for early payment. The loan’s annual interest rate of 14 percent was the highest the company had paid on debt dating back to at least 1995, according to data compiled by Bloomberg.
The Times gave Slim such a profitable deal because it found itself under pressure in early 2009, with a $400 million credit line months away from expiring. Rather than hurry to sell off businesses for cash amid the chaos of the global financial crisis, the company got breathing room it used to eventually find buyers for units such as About.com and the Boston Globe.
Slim has the option of acquiring Times Co. shares through a transaction known as a cashless warrant. Instead of selling him shares at the asking price, the Times would just issue an amount of shares with a market price equal to the value of the warrants. In a cashless transaction, Slim would obtain fewer shares than the 15.9 million for which he has warrants.
The Times investment is a small part of Slim’s fortune, which stood yesterday at $67.1 billion, down 9 percent this year. Though his empire ranges from banking to mining to retail, the brunt of his riches come from a 47 percent stake in America Movil SAB, the biggest mobile-phone operator in Latin America.