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Boston newspaper for sale -- but at what price?

Summary: BOSTON -- Anyone looking to buy The Boston Globe would get one of America's most prestigious newspapers, with a popular Web site, 20 Pulitzer Prizes and a 137-year history of breaking stories that have exposed corruption and public betrayal.

A buyer also would inherit an operation losing tens of millions of dollars a year, readers who are migrating tother news sources and a disgruntled newsroom whose union has vowed to press what could be a costly and lengthy fight to avoid pay cuts.

So if the Globe's owner, The New York Times Co., can draw interested buyers and shfd the Bston opeaauion, partially to better focus on its flagship newspaper, just what might the price be? Analysts say it could be anywhere from just a few million dollars to $100 million.

"For the right buyer, it could be a bargain, depending on what their resources are," said Tom Corbett, media analyst at Morningstar Inc. "There's value there, in real estate. There's value in the masthead, there's a brand there."

The Times Co. recently renegotiated contracts with most of the Globe's unions and imposed a 23 percent pay cut on its largest labor union to slash $20 million in annual expenses. The Times Co. said the step was needed to avoid closing the Globe, which had $50 million in operating losses in2008 and was on track to lose $85 million this year.

Shortly after finalizing the cuts last week, the Globe reported the Times Co. had hired investment bank Goldman Sachs to manage the newspaper's sale. A list of potential buyers quickly surfaced, including Boston Celtics co-owner Stephen Pagliuca, Partners HealthCare chairman Jack Connors and Stephen Taylor, a former Globe executive whose family sold the newspaper to the Times Co. in 1993.

Connors and Taylor declined to comment, while Pagliuca did not return messages left by The Associated Press. A spokeswoman for the Times Co. also declined to comment.

The Times Co. bought the Globe for $1.1 billion - the highest price for an American newspaper and a figure that drives home just how much the industry has changed. At the time, the Globe was seeing big gains in advertising, especially lucrative classified ads. The Globe's ad revenue jumped nearly 36 percent from 1993 to 1998, to $433 million.

But like many newspapers, the Globe has been stung by sharp drops in revenue as more advertisers shift to less expensive options on the Internet. Ad revenue for the New England Media Group, which includes the smaller Worcester Telegram & Gazette, last year totaled $319 million, a 35 percent drop from a peak of $494 million in 2000.

The Times Co. knows it's unlikely to salvage much of its investment in the newspaper. Management has lowered the New England Media Group's estimated value by $975 million since 2006. The Globe accounts for most of the New England division's revenue.

In the most recent report from the Audit Bureau of Circulations, the Globe's average weekday circulation dropped nearly 14 percent to 302,638 from the previous year. Sunday circulation was down more than 11 percent at 466,665.

In a December research note, Barclays Capital credit analyst Hale Holden valued the Globe at $12 million to $20 million.

But estimating how much the Times Co. could now sell it for is difficult, partly because there has been a dearth of recent newspaper sales to compare, said Ken Doctor, media analyst with Outsell Inc.

In March, the parent company of The San Diego Union-Tribune agreed to sell the 270,000-circulation newspaper to a private equity firm. The price was not disclosed, but Doctor estimated it at about $50 million. However, "the value of that paper was mainly thought to be in real estate," he said.

The Globe has some real estate that could be enticing: its headquarters and plant in Boston's Dorchester neighborhood and a smaller printing plant in Billerica that the Times Co. is in the process of closing. According to city and town records, the Boston property has an assessed value of $47.7 million, while the smaller plant was valued at $17 million.

David Begelfer, chief executive of NAIOP-Massachusetts, a commercial real estate development association, said the value of the properties declined as the recession worsened, rents dropped and credit needed for new development became nearly impossible to get.

"Yes, it has value," Begelfer said. "But it's going to be a discounted value."

He doubted potential Globe buyers would make offers based only on the real estate holdings, partly because he estimated it would take at least five years to raise enough money to begin construction on new developments.

"If it was a real estate deal only, it would be a better investment for (the Times Co.) to hold on to the real estate and sell it at a later time," Begelfer said.

In an effort to raise cash and deal with its debt, The Times Co. recently sold 21 floors of its new headquarters in Manhattan for $225 million, then leased much of that space back. The company also put up for sale its 17.8 percent stake in a partnership that owns the Boston Red Sox and related sports properties.

But Doctor said the Times Co. doesn't want to sell the Globe to raise more cash. "I think the Times wants to move it because the Times wants to concentrate on the Times," he said.

He estimated the Globe could sell for an announced price of $50 million to $100 million, though the actual price could be much less depending on how many financial obligations, such as debt or pensions, the Times Co. would be willing to keep on its books.

One key asset in the Globe is, which ranks among the 25 most-read news Web sites in the country. That has helped the Globe capture some of the ads that have moved to the Internet from print, but the online gains haven't come close to offsetting the revenue losses on the print side. will probably sell at least $25 million in ads this year, Doctor said.

"That has value," Doctor said. "They just don't have enough value right now."

There also is the Globe's reputation for excellent journalism. Buyers could leverage the Globe masthead as it expands to new digital platforms, from Kindles to cell phones, Doctor said.

Any new owner would probably be forced to further reduce costs, likely shrinking the Globe's newsroom even more. The newsroom has already lost more than 200 jobs this decade, and had about 380 people when the year began. And further reductions could hurt, which relies heavily on Globe print stories for content.

But with a new, heavily digital business model and a lower cost structure, Doctor said the Globe could at least break even in the near future.

Corbett, the Morningstar analyst, pointed out that whatever the Times Co. is willing to take now from a buyer would fluctuate greatly, depending on how the Globe performs in the coming months.

"If ad revenues and ad spending stabilizes, they might be willing to sit and wait a little bit more," Corbett said.

More likely, though, the Times Co. will become more desperate to shed the Globe, especially if advertising revenue continues its steep decline, Corbett said.

"I think it's going to be more not so much what someone is willing to pay for The Boston Globe," Corbett said, "but how anxious is The New York Times to jettison that unprofitable asset to preserve its core franchise, its crown jewel."

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Publication:Khaleej Times (Dubai, United Arab Emirates)
Date:Jun 16, 2009
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