It's Not A Flip-Flop. It's An Evolution!Jon Fine
This week’s column is about how I’m coming around to think that the New York Times Co. is better off going private.
Um … actually, no. They don’t have to do anything. The Times’ Class B shares, which essentially control the company, are held by a family trust. Said trust is set up, in the wording of a company public filing, “to maintain the editorial independence and integrity of the New York Times and to continue it as an independent newspaper, entirely fearless, free of ulterior influence, and unselfishly devoted to the public welfare.”
Said trust is controlled by eight trustees, all of whom are family members, including Times Co. chairman (and New York Times Publisher) Arthur Ochs Sulzberger Jr. Changing the trust is not easy. It requires the vote of six trustees.
And all this, as Morgan Stanley portfolio manager Hassan Elmasry has discovered, is a pretty effective means of insulating the company from being forced to act in accordance with the vicissitudes of the stock market.
The Times doesn’t need to go private, even if they’ve certainly thought about it.
What’s changed my mind (hence the phrase in the column that I’m “starting to think” going private is the way to keep the NYT safe) is the prospect of a Murdochian, crazy-premium bid coming in over the transom at the Times. We know the Sulzberger family votes as one, etc., and there’s no indication that there’s any significant dissent within in right now. What we don’t know is whether that center will hold if someone starts dangling crazy money for the company.
The other development since the spring is the sharp and sudden tightening in the availability of credit to fund a highly leveraged Tribune-style buyout of NYT. The lenders who liberally and inexpensively funded everything from sub-prime mortgages to Sam Zell’s aggressively-financed ESOP lately have begun worrying about the ability of borrowers to pay them back. So, they are increasing interest rates and, in some case, requiring buyers to pony up more cash to fund future transactions.
Given the continuing, if not to say accelerating, deterioration of newspaper revenues, the credit clampdown could make it more difficult and more expensive for the NYT to go private today than if it had closed such a deal earlier this year.
No question that the debt markets have suddenly grown tougher. But I do think the Times, alone, can Live The Dream that most local newspapers’ partisans delude themselves into believing: The Times can sucker—er, I mean “persuade”—some stupid-rich guys to part with their dough in return for … some non-spectacular return, so long as they get to say they “saved” the Times.
This—duh!—remains an enormously painful and complicated decision to make. (Although the Times Co. does have some assets they can get more than a few bucks for, as I outline in the column.) But Times Co.’s management already got creamed at this year’s annual meeting. Market dynamics, and the Times’ quarterly reports, are only getting worse. And anyone thinking this current state of affairs will end anytime soon—and by “soon” I mean “12 to 24 months”—is nuts.
What I keep coming back to, even if a bit reluctantly, is this: The marquee value of the Times far outstrips its market value. If anyone takes advantage of that dynamic, it should be the Sulzbergers.
If they don’t, someone they really don’t like might.