Should The New York Times Co. Keep 'The Boston Globe'?

By: Jennifer Saba Should The New York Times Co. hang on to The Boston Globe?

Platinum Equity reportedly slid an offer across the table to the New York Times for its New England Media Group for a jaw-dropping $35 million. The proposal, according to a report in the Boston Globe, includes the assumption of $59 million in pension liabilities.

Platinum Equity has been in the mood to shop and do more than look; it recently purchased The San Diego Union-Tribune for a price rumored to be in the $50-million range.

According to the Globe's Beth Healy, the private equity firm is bidding against two other interested parties: Stephen Pagliuca, a co-owner of the Boston Celtics, who teamed up with Jack Connors, an advertising executive and Stephen Taylor, whose family sold the Globe to the New York Times Co. in 1993 for $1.1 billion.

In light of yesterday's news that Cox Media pulled the Austin-American Statesman off the market due to low offers, E&P asked industry observers if the New York Times should follow suit and shut down the auction.

"I think they should keep it," said newspaper analyst John Morton, adding the New York Times should hang on to the properties even if the offer(s) increase. "I understand the problems they face. ... New England has been there before and it has always come back and it will come back again."

Morton said the Globe is a "very powerful name" and that the speculation of it just vanishing is "ridiculous."

Edward Atorino, an analyst with Benchmark Co., believes things are starting to turn around for the newspaper industry. "I think it's too late to sell it in a fire sale," he said before asking, "Did that include Worcester? That is really giving it away. I think given the change in tone, I really think it would be dumping it at the bottom. I don't think they really want sell it."

Just last year Tribune was able to unload Newsday to Cablevision for $650 million. Of course, every market is different -- and every newspaper property is different.

One analyst, who requested to be unnamed, said the choice to cut or keep was a tough one. One gauge depends on how quickly Boston will rebound, but he believes that things are hitting bottom. Citing the recent margins at Lee Enterprises, McClatchy, and the New York Times, when the economy turns for the better, newspapers should see some lift. "A larger metro daily will continue to be much more challenged," he added.

But maybe $35 million (and those pension liabilities) is jaw-dropping in another way, suggested two observers.

"I think they should move on completely," says Lauren Rich Fine, a professor at Kent State University and former newspaper analyst. "The losses there, given their financial situation, are still reasonably large, even with union concessions. I think sometimes bringing in a new group and starting fresh will allow you to achieve things.

"One could argue [the potential offer] might be generous. You are paying for the right to lose money."

Mike Simonton, senior director/media and entertainment at Fitch Ratings, is in that camp. "If the reported bid is accurate, we're surprised they were able to get a positive bid from an acquirer willing to assume that stream of losses and pension liabilities. The acquirer that pays up to take on those substantial losses will have to perform deep cost cutting to get a return on investment that compensates them for the risk of investing in this asset class."