January 21

Slim doubles money with loan to New York Times

Billionaire Carlos Slim’s $250 million investment in 2009, when the newspaper needed help, is paying big dividends for world’s second-richest person.

By Edmund Lee
Bloomberg News

(Continued from page 1)

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The Ochs-Sulzberger family has turned things around at the New York Times by beginning to charge a subscription for online access, cutting costs and hiring an outside chief executive officer.

The Associated Press

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If billionaire Carlos Slim is already the The New York Times Co.’s second-largest shareholder with about 8 percent. If he chose to exercise his warrants and keep his shares, he would own almost a fifth of the company.

The Associated Press

While the loan paid a good interest rate, and the warrants offered the chance for a profit, Slim’s deal with Times Co. wasn’t without risk. Newspapers were hemorrhaging as the Internet provided competition for advertising. Times Co.’s sales had dropped 8 percent in 2008, and they continued to decline every year until 2012.

Still, Slim continued to express confidence in Times Co.’s management and its controlling owners, the Ochs-Sulzbergers. The family has turned things around by beginning to charge a subscription for online access, cutting costs and hiring an outside chief executive officer in Mark Thompson.

Thompson is determined to create new digital-subscription products while reorganizing the sales staff to buoy advertising revenue. Times Co. hit a five-year closing high of $16.09 at the end of last year.

“I don’t see why their earnings should not take them up to $20 a share in a few years,” said Kahn, whose firm holds 5.4 million Times Co. shares.

The company still faces a daunting task in vying for subscribers and advertising dollars, and only one out of nine analysts who cover the stock recommends buying it, according to data compiled by Bloomberg.

A $263 million return is still a drop in the bucket for Slim, whose $69.6 billion fortune puts him behind only Bill Gates among the world’s richest, according to the Bloomberg Billionaires Index. Slim, who turns 74 next week, gets most of his net worth from the companies he controls in Mexico, led by America Movil, Latin America’s biggest wireless company.

Besides his Times Co. stock warrants, Slim also holds 11.9 million shares of the company, mostly accumulated before the loan deal. He didn’t disclose what he paid for the bulk of that stock, making it difficult to calculate how much he has profited from the stake, though he has collected about $1 million in dividend payments.

What’s clear is that lending money to Times Co. helped the company recover from a low point, protecting that early investment.

If the billionaire chooses to exercise his warrants and keep the shares, he would own almost a fifth of Times Co. Slim’s loan in 2009 raised concerns that one of the most venerated U.S. newspapers would be beholden to the Mexican billionaire, who battles accusations of being a telecommunications monopolist in his home country. “Who is Carlos Slim, and does he want the paper of record?” read a headline in the New Yorker. “Let’s keep an eye on Senor Slim,” media columnist Jack Shafer wrote in Slate.

A takeover, however, is unlikely given the publisher’s dual-class share structure, which gives the Ochs-Sulzberger family a firm grip over the company’s board.

Slim is already the publisher’s second-largest shareholder with about 8 percent. His 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 Ochs-Sulzberger family’s Class B shares let it elect the remaining two-thirds of the board, giving it effective and lasting control. Class B shares aren’t publicly traded.

Slim has consistently said he believed the publisher would overcome its struggles because its reputation and name recognition would help it survive the difficult transition from print to the Internet.

As he put it in a 2009 interview, “That is one of the best newspapers and brands in the world.”

 

With assistance from Patricia Laya in Mexico City.

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