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Red Sox stake could fetch Times nice haul
CHICAGO (Reuters) - New York Times Co (NYT.N) could raise at least $200 million if it sold its 17-percent stake in the Boston Red Sox baseball team to raise cash to counter the advertising decline that is gouging U.S. newspaper publishers, analysts and sports bankers said.
The Red Sox stake is as noncore an asset as you can get for the Times and would still be attractive to many buyers despite the recession, given the team's success and popularity, according to the analysts and bankers.
"Sports teams are high on the list when media companies look to sell noncore assets, typically because they command strong valuations and generate limited amounts of cash flow," Fitch Ratings analyst Mike Simonton said.
As recent examples, he cited Time Warner Inc's (TWX.N) sale in 2007 of the Atlanta Braves and the push by Tribune Co this year to sell the Chicago Cubs to pay down heavy debt that led the publisher to file for bankruptcy on December 8.
A Times spokeswoman said the company, which has slashed its dividend and moved to borrow against its headquarters, does not comment on potential divestitures. A Red Sox spokeswoman said the club does not comment on ownership matters.
However, the Times, which owns its namesake paper and the Boston Globe, on December 9 said it continued to weigh the sale of assets, adding the feasibility of such a move was "uncertain" given the recession and tight credit markets.
In outlining plans to cut borrowing and talk to lenders about debt that matures in 2009 and 2010, it said next year will be one of its most challenging.
The U.S. newspaper industry has seen an unrelenting loss of readers and advertisers as more people get news online and publishers cut marketing budgets amid the economic crisis. Simonton expects several newspaper groups could default on debt payments in 2009 and some papers could even shut down.
On a widely read media business news blog, Silicon Alley Insider (www.alleyinsider.com), former Wall Street analyst Henry Blodget on October 24, said the Times was "running on fumes" and suggested a rescue plan that included selling the Red Sox stake.
The Times got its stake in the Red Sox in 2002 as part of the group led by hedge fund manager John Henry that purchased the team, Fenway Park and an 80-percent stake in New England Sports Network, a regional cable sports network, for $700 million including debt.
While Tribune Co could draw bids of $1 billion for the Cubs, Wrigley Field and a 25-percent stake in a regional cable sports network, the Red Sox are worth more, analysts said.
"The Cubs are a dream at $1 billion," said Robert Tillis, chief executive of Inner Circle Sports, a merchant bank in New York focused on the sports industry. "You could argue that the Red Sox business model is more advanced than the Cubs."
Given the Boston club's strong finances, larger TV network holdings and other assets, including a stake in a NASCAR racing team, the Red Sox are worth $1.3 billion or more, analysts said. Accounting for the club's estimated debt, the Times stake could be worth more than $200 million.
The Times could sell its stake back to current partners in the ownership group, friends or family of those partners, or turn to outsiders, analysts said. it could even sell multiple smaller stakes or retain a smaller share of the club.
The combination of the Red Sox's popularity and the small nature of the stake make it more likely a deal could get done.
"There's so much quiet wealth in the Boston area, they may get close to full value even in this trying time," said Marc Ganis, president of Sportscorp Ltd, a sports business consulting firm in Chicago.
Complicating any potential deal, however, is the number of baseball assets available, some analysts said. The Cubs hope to identify a winning bidder by year's end, and the owner of the San Diego Padres has hired Goldman Sachs (GS.N) to find a buyer.
Speculation also has centered on whether New York Mets owner Fred Wilpon's investments with Bernard Madoff, the longtime Wall Street executive accused of cheating investors around the world out of some $50 billion, could lead to the sale of a piece of that team.
"Is there enough money to chase three top-of-the-line franchises?" Robert Boland, a professor of sports management at New York University, said of the Red Sox, Mets and Cubs.
Another factor in any potential sale would be finding a buyer who would receive the required approval of Major League Baseball Commissioner Bud Selig.
Fitch's Simonton said the pressure on the Times to raise cash in 2009 will only increase. "It's important for them to send a message that they're willing to generate cash from other sources like asset sales."
(Editing by Maureen Bavdek)
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