The New York Times Co. said it will get a $250 million investment from one of the world’s richest men, Mexican billionaire Carlos Slim, a move that will give the company much-needed time to clear financial hurdles.
Slim, 68, who already owns 6.9% of the Times’s stock, will receive warrants in the company that could give him an eventual 17% interest in the publisher. That would make him one of the largest shareholders in the venerable newspaper publisher, following the Ochs-Sulzberger family that has controlled the company for more than 100 years. It is unclear what Slim’s eventual aim is with the company.
The investment comes at a critical time for The New York Times. The company, which owns the namesake newspaper as well as The Boston Globe and other local US papers, is struggling to pay off more than $1.1 billion in debt in the next few years, even as advertising revenue deteriorates.
The Times has $46 million in cash, but faces a $400 million credit facility that expires in May. The company is trying to sell its stake in the holding company that controls the Boston Red Sox baseball team and might sell more properties.
Slim, the world’s second-richest man with a net worth of $60 billion, according to Forbes magazine, has not said what his eventual intention is with the Times. A spokesman on Sunday declined to answer questions, including whether Slim wants to eventually buy the Times.
The drop in advertising revenue at publishing companies has partly come from a fundamental change in the way people read news. More people are getting it online for free and dropping print subscriptions. The world financial crisis has accentuated the fall in advertising revenue and media stocks have taken a battering.
The Times’s shares have dived 70% from their 12-month high of $21.14 in April 2008 to $6.41 on Friday. Times CFO James Follo said Slim’s interest is purely financial, echoing a statement Slim made in September when he disclosed a 6.4% stake. Slim approached the Times about an investment several months ago, Follo said.
The investment illustrates how newspapers are turning to rich patrons to give them a lifeline to keep producing journalism even as their own financial fortunes wane. It is an unusual move for the Times, which has been controlled by the Ochs-Sulzberger family since 1896 through a special class of shares. The family also owns about 20% of the company in publicly traded and special shares.
The Times had not allowed outsiders on its board until last year, when hedge fund Harbinger Capital Partners bought a stake about equal to that of the Sulzberger family. The fund demanded the company give it representation and consider selling non-core properties to turn around its flagging stock price.
Under the terms of the deal, Slim will invest through his Banco Inbursa S.A., Institucion de Banca Multiple, Grupo Financiero Inbursa and Immobiliaria Carso. “We believe that with the strength of The New York Times brand, its national and international reach, its potential for digital expansion and most of all, its world-class news and information, the Company will continue to be a leader in the media industry,” said Arturo Elias, director of Immobiliaria Carso and son-in-law of Slim.
Slim would receive notes due in 2015 with warrants convertible into common shares, the Times said in a statement. The notes carry a 14% interest rate, with 11% paid in cash and 3% in accrued interest. The warrants are for 15.9 million Class A shares with a price of about $6.35. Once converted into stock, they would give Slim a 17%-stake in the company, in addition to the shares he owns now.
If he endorses the Times management’s way of doing business, he and the Sulzbergers could be a bulwark against dissident shareholders, allowing the company to try to reinvent itself on its own terms.
Slim wields immense political and economic power in Mexico, where he built a telecommunications empire on America Movil the largest cell phone operator in Latin America, and Telefonos de Mexico -- or Telmex -- the largest Mexican fixed-line phone company.
While known too much of the rest of the world as a philanthropist in the past several years, he has fought charges of monopolistic practices that his detractors say were essentially sanctioned by the Mexican government.
News that Slim would invest in the Times beyond his stock stake was reported in The Wall Street Journal on Saturday. (Reuters)