Reducing Our Offer For The New York Times (NYT)

As you recall, back in July, we happily made an offer for the digital operations of the New York Times Company (NYT).

We offered a massive price--$1 billion--and proposed an innovative deal structure that would avoid the need for annoying shareholder approvals, jillion-dollar legal fees, egregious tax hits, etc. (In short, the NYT would acquire us, and then spin us and NYT Digital out--see details below). We explained how we would run the standalone NYT Digital and how the proposed transaction would benefit New York Times shareholders, who have since been obliterated. 

Well, we are pleased to say that, despite the global market carnage, our offer remains in effect! Alas, in light of the impending depression and recent developments at the New York Times Company, we must mark our offer to market.

In July, when we made our offer, NYT's stock was at $12. Now it's $6. Also, the New York Times Company is now running on fumes. So now we're probably looking at a number in the $400 million range.

We're still stoked about this opportunity, though.

(One thing we do need to discuss is your cash crisis. Back in July, you seemed to be awash in the stuff, and we were counting on this to take care of our post-merger working capital needs. Now, we may have to ask you to draw down your remaining $400 million credit line before the banks wake up and cut it off. We would advise you to do this anyway, by the way. The Red Sox stake would probably work, too, as long as we could liquidate it in a timely fashion.)

Our Original Offer For The New York Times Company (July 25, 2008):

At its charming new stock price of $12, the New York Times Company (NYT) has an enterprise value of about $2.85 billion. As BusinessWeek's Jay Yarow notes, after you back out all the non-core stuff, that means that the New York Times itself--the paper and the digital assets--are valued at about $750 million. That's less than half of what CBS just paid for CNET.

So we have an offer for the New York Times Company: We'd like to buy New York Times Digital from you.* Not the venerable paper or printing plants. Not the gorgeous building you own in midtown Manhattan. Not your share of the Red Sox. Not the regional papers. Not the Boston Globe. Just New York Times Digital--the Martin Nisenholtz division that gets zillions of unique visitors a month.

How much are we willing to pay? $1 Billion.

That's right: A 33% premium over what the entire New York Times division is valued at right now--just for the web site! Not a bad price, given our collapsing economy. And especially not bad considering that we think the newspaper industry is hosed.

Why do we just want the web site?

Well, in truth, we'd like the whole thing, but the New York Times won't survive in its current form, and we're not thrilled about the idea of losing our shirts. We're also not eager to be vilified by the labor unions, newsroom, and Columbia Journalism Review for doing what needs to be done to save the business. So here's what we're going to do instead.

1. Sign a contract with you that allows us to reprint all New York Times content for three years. This will give us some time to build our own news organization, one unencumbered by the various cultural, economic, and contractual baggage that is currently preventing you (and other papers) from saving yourselves.
   
2. Immediately make offers to the 20% of your journalists and editors that we think can make the transition to digital (24/7 real-time blogging). These folks won't be hard to find, given that some of them are writing excellent blogs already. (Andrew Ross Sorkin, Floyd Norris, David Carr, Joe Nocera, Gretchen Morgenson, Brian Stelter, Saul Hansell, Paul Krugman, Landon Thomas, and a few dozen other folks jump to mind.) By the way, we don't mind if these folks continue to distribute their stuff in the paper, too, so don't worry about losing them. In fact, that would be great exposure for us.
   

Why will we only be making offers to 20% of your staff? Because the economics of the online business won't support any more than that. And because 20% of your folks are probably accounting for at least 80% of your pageviews and readership anyway.

So how about it, Janet and Arthur? $1 Billion. More than a third of the current enterprise value of your entire company--just for the web site! You get to keep the paper, the building, the Red Sox, the Boston Globe. It's the deal of a lifetime!

*N.B.: We're actually much more excited about this offer than we were about the one we made for CNET a few months back. Truth be told, we just couldn't get that excited about CNET. But The New York Times? We f***ing LOVE the New York Times!

Here's how we propose structuring the deal:

We just raised $1 million, so that means we only need another $999 million to close. Raising the money shouldn't be a problem, but who needs that hassle. So here's what we'd like to do instead:

We'll agree to let you acquire us for, say, $100 million of New York Times stock. Then, in a simultaneous closing, you can spin us and New York Times Digital out as a separate public company--via a special dividend to shareholders. (You can load us up with enough debt to make the numbers work, and then we'll convert it to equity).

Sound good? We think so. We look forward to hearing from you.