Worst Merger Ever?

Bloomberg and many others have the numbers.  A couple of days ago the New York Times sold the Boston Globe to Red Sox owner John Henry for $70 million.  Twenty years earlier the purchase price was $1.1 billion.   To add insult to injury, NYT picked up the pension liabilities reported by Bloomberg at $110 million but by others at $100 million.  In short, it cost the NYT $30+ million to get rid of the Globe.  At least when the Washington Post sold Newsweek they got a dollar.  The America Online merger and spin-off with Time Warner (2000-2009) is larger and spectacularly unsuccessful but the NYT-Globe merger and divestiture is a rival.

Sidebar: This is probably one of those rare accounting mergers with a “Gain on Bargain Purchase.”  John Henry will be recording a gain because it is reported that the real estate is worth the purchase price.  With the major liability gone and because the assets must be recorded at fair value then it is likely that there is a gain on bargain purchase.  The NYT has limited Goodwill to write off on the sale because it has already written off $805 million of the total $928 million in Goodwill as of 12/30/12 (Yes 12/30 is correct as the NYT fiscal year covers 52 or 53 weeks rather than a year).

It looks like a great deal for John Henry.  If the Globe continues to sputter he can sell it or sell the parts.  If it doesn’t then the purchase will be profitable.  The way to profits are to move the Globe towards the center.   Use the mirror image of the Wall Street Journal.  The editorial page is right wing.  The rest of the paper much closer to the middle.  A left wing editorial page and a curious news page could be successful.



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