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By Robert MacMillan
NEW YORK Jan 17 The New York Times Co (NYT.N)
is in talks to raise hundreds of millions of dollars from
Mexican billionaire Carlos Slim, a source told Reuters on
Saturday, a move that would give the ailing newspaper publisher
a critical cash infusion to pay its debt.
An investment by Slim, the world's second-richest man
according to Forbes magazine, could also be a vote of
confidence in the Ochs-Sulzberger family, whose control of the
Times for more than a century has been threatened by changes
shaking the foundations of the U.S. newspaper business.
The Times, which owns its namesake newspaper and The Boston
Globe as well as other papers in the United States, is
grappling with a decline in advertising revenue on a level that
it and other newspaper publishers have never seen before.
According to the source, the Times might give Slim, who
already owns a 6.4 percent stake in the company, preferred
stock with no voting rights, but with an annual dividend.
The Times is planning a special board meeting next week
about the investment, the source said. The news was first
reported by The Wall Street Journal. A New York Times
spokeswoman declined to comment.
The money could help the Times pay off $400 million in debt
in a credit facility that will retire in May.
Newspaper publishers from McClatchy Co (MNI.N) to Tribune
Co have carried debt on their books, but that did not become an
issue until ad revenue started to fall as and profit margins
began eroding. This was due in part to a fall in circulation as
more people turned to the Internet for free news.
The ad decline has been exacerbated by the financial
crisis. Now, papers in cities like Denver and Seattle may shut
down this year because their publishers can no longer afford to
keep them and can find no one to buy them.
The Times's shares have plummeted 70 percent from their
12-month high of $21.14 in April 2008 to $6.41 on Friday. Seven
years ago, the shares were trading above $50.
Slim's stake in the Times was worth about $128 million in
September 2008. Since then, its value has shrunk to about $58
million. At the time, Slim described his investment in the
Times as financial rather than strategic.
Slim, 68, became one of the world's richest men by placing
heavy bets on hard-hit companies. Last year, he increased his
stake in U.S. luxury retailer Saks Inc SKS.N to 18 percent,
becoming its biggest investor.
His Inbursa brokerage in Mexico bought at least $150
million worth of Citigroup (C.N) shares as they sank to lows
not seen since 1992. It was not clear if Inbursa bought the
sake for Slim or other clients.
Many media observers say the well-respected Times will
survive as many other papers fail. Nevertheless, the company
has been forced to think about selling off properties to
bolster its cash position, such as its 17.5 percent stake in
the holding company of the Boston Red Sox baseball team. It has
received at least one offer for the Globe, sources have said.
The ultimate question is how long the Ochs-Sulzberger
family will stay in the business. Multiple media reports and
commentators have questioned if the family has the stomach to
stay involved despite the plunging value of their stock. So
far, however, Times Chairman and Publisher Arthur Sulzberger Jr
has said that the company is not for sale.
The Times also is facing a renewed threat from The Wall
Street Journal, owned by News Corp (NWSA.O), whose chief
executive, Rupert Murdoch, has made no secret of his intent to
knock the Times off its perch as the top national U.S. paper.
Times executives saw Slim's initial investment as a good
development, a source familiar with the matter at the Times
told Reuters at the time.
It came several months after hedge fund Harbinger Capital
Partners bought about 20 percent of the Times's shares,
demanded that the company sell non-core assets to boost its
stock price and got two of its representatives elected to the
board -- initially over the Times's objections.
Slim's business empire includes Latin American cell phone
giant American Movil (AMXL.MX), former state-owned Mexican
telephone company Telefonos de Mexico TELMEXL.MX, financial
conglomerate Grupo Financiero Inbursa (GFINBURO.MX), department
stores, restaurants and manufacturers of cigarettes, floor
tiles and car parts.
(Editing by Eric Walsh)