Retired General Electric CEO Jack Welch, one of the most respected businessmen in America, is reportedly interested in buying the Boston Globe from The New York Times Co.
JP Morgan, which has been retained by Welch and his partner Jack Connors, estimates the Globe’s value at $550 million to $600 million, below the $1 billion the New York Times paid for the paper in 1993, according to story in The Globe. (I’d be curious to know the assumptions behind that valuation) The paper quickly adds that executives who have been briefed on their plans caution they are “preliminary.’’ Then there’s the added problem that the Times recently said that it’s not interested in selling the venerable publication. But the real question is whether Welch and Connors are letting their civic pride get in the way of sound business judgement. “Welch and Connors hope to return the paper to its community roots and stem continuing cutbacks in the editorial budgets and losses in advertising and circulation,’’ the paper says. Good luck with that one. The Globe has been a poor financial performer, even by the standards of big-city dailies. Sunday circulation has plunged 25 percent since the Globe’s acquisition by the New York Times, according to the paper’s account. Advertising revenue at the paper’s New England Media Group is down 10 percent as of September.
The New York Times Co. shares have dropped 14 percent this year. The company has claimed its two-tiered shareholder structure, which keeps the Sulzberger-Ochs family in control, insulates it from Wall Street and helps foster good journalism. However, some shareholders, including Morgan Stanley, are growing restless. The investment bank withheld its support for the company’s directors in April because of the company’s ownership structure, saying it fostered a lack of accountability. Morgan Stanley has recently increased its stake in the publisher, betting that the stock price will go higher. In those situations, investors expect management to do everything to boost the stock, including asset sales.