Billionaire Carlos Slim Doubles Holdings in New York Times

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Billionaire Carlos Slim became the largest investor in the New York Times Co. after exercising options to acquire 15.9 million shares in the newspaper company.

Slim bought the shares for almost $6.36 each, about half of Times Co.’s $12.28 closing price, Times Co. said today in a statement. That boosted his stake to 16.8 percent of the company’s Class A shares.

The world’s second-richest person gained the options after he lent the paper $250 million in January 2009 to help it get through the financial crisis. That loan was already repaid early and with interest, and the gap between the exercise price and Times Co.’s share price gives Slim an additional potential profit of about $94 million.

The larger stake, now 27.8 million shares, shows the billionaire’s confidence in the newspaper’s future -- at least from a financial perspective -- even as readers and marketers have flocked to the Internet where content is largely free and ad rates are cheaper. Since Slim’s loan, Times Co. has cleaned up its balance sheet, created a paywall for its website and introduced new digital products.

Slim planned to hold on to the expanded equity stake after exercising the warrants, rather than sell the shares for an immediate profit, a person with knowledge of the matter said last year.

Arturo Elias Ayub, a spokesman for Slim, didn’t reply to requests for comment. Abbe Serphos, a spokeswoman for Times Co., declined to comment beyond the company’s statement, which didn’t specify Slim’s plans for the larger stake.

Stock Buyback

Times Co. said it received $101.1 million from Slim’s exercise of his warrants and plans to use the money to buy back Class A shares.

“We believe a share repurchase program in this instance is an appropriate use of the cash proceeds,” Chief Executive Officer Mark Thompson said in the statement. “It is in the best interests of the company to continue to maintain a conservative balance sheet and a prudent view on the allocation of free cash flow.”

The “one-off” buyback program shouldn’t be seen as a change of position in the company’s capital allocation plans, Thompson said.

Slim’s stake in the company is now valued at $341 million based on today’s closing price. Fairpointe Capital is now the Times second-biggest shareholder, with a stake of 9.44 percent as of Sept. 30, according to data compiled by Bloomberg.

When 74-year-old Slim agreed to loan Times Co. money in 2009, the company had just canceled its dividend to preserve cash and a credit line was set to expire. Slim’s investment bought the company enough time to find buyers for assets like the Boston Globe.

Takeover Hurdles

Even with the bigger stake, a takeover would be difficult because the 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 family’s Class B shares, which aren’t publicly traded, elect the remaining two-thirds of the board.

The last year has been tumultuous for Times Co. in the newsroom and on the business side. In May, Chairman and Publisher Arthur Sulzberger Jr. ousted Jill Abramson as executive editor after less than three years on the job. And at the end of last year, the paper cut more than 100 newsroom employees through buyouts and firings to save costs. The company’s shares declined 18 percent in the past 12 months.

Newspaper Growth

Meanwhile, the company is trying to maintain growth in online subscriptions, which totaled about 875,000 at the end of the third quarter, and print readership has continued to decline. Digital ad revenue has increased, but not enough to make up for the drop in print advertising.

Even without the warrants, Slim had made a profit on his investment. The Times paid Slim back in 2011, including a 12 percent premium for early payment. The loan had carried an annual interest rate of 14 percent.

Plus, Slim has collected about $2.9 million in dividend payments since it was reinstated in 2013. If Slim holds on to his bigger stake, he’ll collect about $1.1 million in dividend payments each quarter. Slim didn’t disclose what he paid for the bulk of the stock he accumulated before the loan deal, making it difficult to calculate his profit on that stake.

The Times Co. investment is only one element of Slim’s empire, which ranges from banking to energy to retail. The bulk of his riches come from a majority stake in America Movil SAB, the mobile-phone operator trying to sell assets in Mexico to reduce its market share.

(Updates with profit on warrants in third paragraph.)
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