Could Slim be a bad harbinger for New York Times dissidents?
Mexican billionaire and telecommunications tycoon Carlos Slim is poised to throw hundreds of millions of dollars at The New York Times Co so the newspaper publisher can buy some more time to get its act together as advertising revenue falls and debt looms. If he is truly an ally of the Times, as our sources say, it could prove bad news for dissident investors like Harbinger Capital Partners who are pressing for drastic changes at the Times.
The Wall Street Journal broke the story on Saturday night, closely followed by Reuters. It was The New York Times itself (surprise!) that reported the specifics of Slim’s “bailout package” for the Times:
- A $250 million investment in exchange for 10-year notes with warrants that are convertible into common shares.
- A special annual dividend would go to Slim — maybe 10 percent or more of his investment.
- No voting rights, no board seat.
- With his 6.4 percent stake in the Times’s common shares, this could make him the largest Times shareholder, bigger even than the Ochs-Sulzberger family that has controlled the times since 1896.
The value of Slim’s previous investment already has fallen, but if he is treating the Times more as a philanthropic exercise than a business decision, this could work out well for both parties.
Here’s what Slim would get: A burnished reputation. The 68-year-old Slim has been trying to remake his image in recent years from that of a robber baron who cornered the Mexican telecommunications market, shut out competition and got tacit (if not explicit) government support for it.
The world’s second-richest man, Slim also has been donating millions to charity. Helping a liberal-voiced, family-run newspaper empire in distress — one of the world’s most famous, independent newspapers, we hasten to add — without interfering in its strategic direction or editorial focus is a nice way to get people to respect you.
Here’s what the Times would get: Time to figure out how to right itself financially. As I wrote in an analysis on Sunday, the Times has a big to-do list, including possibly selling its Red Sox stake, The Boston Globe and pursuing other moves.
More importantly, making Slim the largest shareholder in the Times and keeping him allied with the Sulzbergers’ interests could inoculate the company against angry shareholders. We’re thinking primarily of Morgan Stanley money manager Hassan Elmasry, and, more recently, hedge fund Harbinger Capital Partners. Last year, Harbinger got two people elected to the Times board, something that the Times wasn’t too happy about. If I were Harbinger fund manager Phil Falcone, I wouldn’t be crazy about Slim.
One “to-be-sure” thought, as we call them in journalism: Slim’s record as a Daddy Warbucks for undervalued stocks has not always produced a happy ending. When his investment in computer retailer CompUSA went bad, he dumped the company into the hands of a restructuring firm. The ruthlessness with which he built his telecom empire in Mexico also has earned him more than a few detractors.
(Photo: The New York Times gets a shock. Reuters)