The New York Times company has announced an agreement to sell its television station group to a private equity firm, Oak Partners for $575 million dollars. The group intends to sell off the profitable collection of nine broadcast properties. Last Fall, I commented: Overall profitability of the company last year amounted to roughly a 7.7% return on gross sales, according to a report the company filed with the Securities and Exchange Commission. But the television station group earns almost three times as much per sales dollar, at 22%, according to the company's statement.
Companies normally sell off their less profitable businesses and keep the winners. But the NYTCo is no ordinary business, and it may need more cash than the declining businesses it owns can provide. While its recent purchase of About.com is profitable, the magnitude of the profits is tiny compared to the rest of the company and compared to the purchase price Pinch paid. [....]
It is theoretically possible that the sale of the broadcast properties is a brilliant, well-planned strategy. But if the television stations were to be liquidated, the best time to have done so would have been several years ago, before cable television and the internet predictably began to really destroy big chunks of the value of broadcast television licenses. Back when broadcast television was more of monopoly, or at least a more dominant force in advertising markets, local affiliate stations were valued much higher than they are today.
Still, the company is likely to post a substantial capital gain on the sale of the station group, since the properties were purchased long ago. This raises the question whether or not the company might be pondering a sell-off of other assets, specifically the Boston Globe and/or other newspaper properties in New England. There has already been speculation that the company would unwind the disastrous purchase of Affiliated Publications, just at the height of the market for newspapers, before the internet-induced crash. In late December, the McClatchey Company unwound a similarly disastrous purchase of the Minneapolis Star-Tribune, a newspaper whose liberalism rivals that of the Globe (and Times), and which has lost half its value since 1998 when it was purchased by McClatchy. Like the Globe, The Strib faces a rival newspaper in its circulation zone and has lost advertisers and circulation.
Should the Times sell the Globe at a similar loss, it could use the loss to shield some or all of the gains from the TV stations. While this is smart from a tax standpoint, it does not make the move into good news.
The company appears to be focusing on the national edition of the Times, and on internet publishing, which is profitable and growing, but for which the company has paid richly in its acquisitions. It will be a smaller, if not necessarily wiser comany.
Hat tip: Clarice Feldman