A Globe Sale in the Offing? Hope vs. Reason

By Rick Edmonds

I stand corrected -- sort of. Having written Monday night that the Guild's rejection of a new contract at The Boston Globe would make it very unlikely that the New York Times Co. can sell the paper in the short-term, I learned this morning that the Times Co. has hired Goldman Sachs to advise it on a sale and that there are two prospective bidders.

However, entertaining bids, getting them and closing a deal are three different things. I still think continued labor turmoil makes a dicey business proposition that much more unattractive, and that only an eager buyer willing to offer a meaningful premium ($100 million-plus) has a chance to get the Globe.

 

Why, then, hold out hope for a deal or go through the motions?

 

In a couple of the community-based ownership changes in recent years, buyers have been motivated enough to offer a premium. Brian Tierney's group in Philadelphia offered nearly $550 million in the auction for The Philadelphia Inquirer and Daily News, much more than other bidders. Likewise, the Dolan family's Cablevision paid $650 million a year ago for Newsday a year ago, outbidding Rupert Murdoch, no less. That acquisition provided some synergy with the family's cable business and added standing as Long Island business leaders.

 

Murdoch himself, of course, upped the going share price of Dow Jones by 67 percent to get the attention of the Bancroft family and make them a $5 billion offer that they couldn't afford to refuse. The Wall Street Journal was a trophy property -- but so, too, may be the Globe in the eyes of a rich and public-spirited Bostonian or group of Bostonians.

 

For the right price -- a lot more than the Globe is likely to fetch -- a buyer could get the New York Times Co.'s 17.5 percent stake in the Red Sox, too.

 

I wonder, too, if the extremely close no vote (changing seven of the 542 votes would have ratified the contract) may embolden a potential buyer. A self-confident buyer, coming in fresh and not wedded to an ultimatum like the Times Co.'s 23 percent pay cut, may believe he can play labor peacemaker.

 

On the other hand, a buyer could view the Guild majority as toxic, angry and clinging to the lifetime job guarantees that some have -- and thus at odds with younger members and the Globe's other unions, which ratified concessions.

 

One more plus for a potential buyer could be the notion that the paper has gotten its house in order on the cost side. Globe and Times Co. spokespeople have described the 23 percent cut as simply an alternative way to obtain the necessary savings (and have implied their confidence that it will stand up against challenges before the National Labor Relations Board or in court).

 

Only those who sign confidentiality agreements will get to see what is in the books. But no one in management has disputed my analysis earlier this week that the projected operating loss of $85 million cited in bargaining was loaded like a baked potato with depreciation, amortization and other special charges, cash and non-cash. On a cash basis, the paper should be able to run close to break-even (barring even worse revenue declines) for the rest of 2009. So a new owner probably wouldn't have to dispense $1 million each week to keep the lights on.

 

Tea-leaf reading on a separate matter: I was intrigued by national Guild president Bernie Lunzer's comment that "mistakes were made" in the negotiation. As one wag put it, that phrase is the "passive exonerative" euphemism for "we screwed up but so did others." It echoes scuttlebutt I have heard from others covering the Globe's distress that Guild members were not happy with their representation. And why should they be? No new contract, oodles of uncertainty and a 23 percent pay cut starting next week.

 

Management did make a mistake earlier in the negotiations, calculating pension savings based on an outdated headcount (which meant they had to ask for deeper concessions to reach the target savings).  Without knowing labor law, I think that may be the Guild's best handhold in arguing that the negotiations were flawed or prematurely broken off.

 

Management describes its meeting next Monday with the Guild as a formality to impose the 23 percent cut. But the sides didn't end up far apart last round; each made a blunder or two. Could there be a quick recalculation and agreement on a Plan C, acceptable to both and ending the drawn-out nastiness? Probably not, but in labor fights, never say never.