Goldman Sachs Remains Skeptical of Hedge Fund 'Strategy' for NYT Co.

By: Jennifer Saba Goldman Sachs analyst Peter Appert puts a pencil to paper and figures out the financial payback of Harbinger Capital/Firebrand Partner's strategy for The New York Times Co. and basically concludes the company is better off with its current management and board.

Harbinger and Firebrand suggest -- though a real plan has yet to be revealed other than a proposed slate of Class A nominees -- that the New York Times should sell its non-core assets and reinvest the proceeds in high-growth Internet-related companies.

Appert strikes down that notion: "We believe investors may be miscalculating the financial implications of a massive asset swap at the New York Times," he wrote in a research note released this morning.

By his calculations, if the company sells its New England Media and Regional Groups, its stake in New England Sports Ventures, and its headquarters building, and keeps the flagship and the International Tribune, the company could fetch an estimated $1.8 billion after taxes. That comes to a multiple of about 7 times EBITDA.

However, by plugging that money into high growth Internet investments with average multiples of about 19 times EBITDA, the company's 2008 EBITDA would drop by roughly $100 million.

By taking Harbinger/Firebrand's approach a reconfigured New York Times would have a value of about $16 per share.

Goldman Sachs current price target on the company is $12 per share. Appert notes that though it's lower than the value of a proposed reconfigured company at $16 per share, it is still below the current share price. As of this morning the New York Times was trading down to $18.65.

Goldman Sachs thinks the New York Times is a unique and appealing asset. "We do not believe, however, that there is a quick or easy fix to the challenges facing the company, other than continued investment to drive a migration of revenues and earnings to Internet-based operations," wrote Appert who adds later that management is on board with that goal.

Goldman Sachs maintained its "sell" rating on the company. "While we like the company's assets and industry leading Internet position, we don't like the stock."