How to Buy the New York Times Co.If the Sulzbergers want to take their company private, here's a plan.
Updated Friday, Jan. 26, 2007, at 6:02 PM ET
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StumbleUponGoing forward, the newly private company would have to support an additional $2.3 billion in debt. This is where buyout calculations frequently run into trouble. Assuming the Times can find banks to lend it money at 6 percent a year, the company would have to come up with an extra $140 million in interest payments annually. That's a lot. But the Times would save a big chunk of money from no longer paying a dividend to public shareholders, which currently costs about $100 million per year. The company would also save about $5 million a year by not having to comply with Sarbanes-Oxley and other regulations. And so the company would need to devote an additional $35 million in cash flow each year to meet payments.
Could it do so comfortably? In the nine months ended in September, the Times had $174 million in operating profit, which annualizes to about $230 million per year. Selling units like the television stations and the Globe would reduce operating profits. But as these data on circulation and ad revenue show, the Times itself has revenues of something like $2 billion a year, and the regional newspapers another $500 million. If the company can sustain existing operating margins on its newspapers, it shouldn't have much difficulty making the extra interest payments.
And should the company run into trouble, it would still own many valuable assets that it could sell. The regional newspapers have a combined daily circulation of more than 600,000. About.com, for which the Times paid $410 million in 2005, has increased sharply in value. The Times also owns 58 percent of its new headquarters building, plus the International Herald Tribune, radio station WQXR, 49 percent of Donohue Malbaie, a Canadian newsprint company, and 40 percent of Madison Paper Industries.
In some ways, life as a more-leveraged private company would be more risky for Arthur Sulzberger and his management team. But given the continual harassment they endure in exchange for remaining public, the risk might be worth the reward.
(Disclosure: I contribute regularly to the "Economic View" column in the Sunday New York Times business section.)
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