The New York Times not good at communicating with investors

 —Mick Gregory

The famous Sulzberger dynasty run by 54 year old “Pinchy” is tightening its financial grip on the New York Times. They are doing it the old fashion way, using shareholders’ cash, instead of their own to buy out the company. This is coming to light via a new business analysis by the Boston Herald.  

These plans by the Suzbergers are not reported in the pages of the Times. Why not? The dynasty is  not obligated to telegraph their plans to their readers. But shouldn’t their stock investors know?  After all, the loyal stockholders own 80 percent of the NYT stock, but have virtually no voting rights or representation on the board of directors.

The Herald examination of Times financial filings shows that since Arthur Sulzberger Jr. took over as chairman in 1997, The New York Times Co. has bought up more than 20 percent of the stock held by outsiders.

Meanwhile the Sulzbergers themselves have “basically held their shares,” says company spokeswoman Catherine Mathis. Without  spending a dime, the newspaper dynasty has raised its stake to about 20 percent. (Who said editors are not very good at math?) The jury is still out on that, read on.

The Times has spent $3 billion so far buying out shareholders. And those who were bought out should be very happy. Total net income from 1997 through 2005: $2.85 billion. In other words, pretty much every penny of profit generated by the New York Times, the Boston Globe and other company operations under Pinch has been spent . . . gradually returning the company to Sulzberger hands.

Pinch and his inner-circle blew much of the cash buying stock at the peak of the market. Based on 2006 prices, they overpaid by $1.2 billion.   If they handed out Pulitzer Prizes for blowing shareholders’ money, Pinch could finally add his name to the Times’ roll of honor.   You’d expect such largesse at least to keep the share price aloft, right?

Actually, since Pinch took over the company, it’s fallen by nearly a fifth.  Washington Post shares, over the same period: up 69 percent. They paid over double!  

But if you look at the Times’ share purchases from the other side, the program starts to make a lot more sense.  The Sulzbergers already control the special voting shares. But to take the company private, they would have to buy out everybody else. And, today, that would cost little more than half what it would have back in 1997.  Likely savings: About $2 billion.  A deal would probably appeal to Sulzberger for personal reasons.

Lowlights of Pinch’s nine-year reign: Jayson Blair, Judith Miller and now a collapsing stock price. Taking the Times private could at least remove some of his problems from public view.   

But don’t expect a leveraged buyout too soon. They can’t afford it.

Brian Shipman, analyst at UBS, said a deal “is certainly a possibility” at some point. But, he thinks, not at current levels.

He thinks New York Times stock would have to fall to about $17 before it started to look attractive to the kind of private equity backers that Pinch would need. Other analysts suggested $15.

The good news for the Sulzbergers? Based on recent trends, that day cannot be far away. Who are the real sad bastards in this story? The shareholders who are not related to the family.