When You Account For Pensions, The Boston Globe Sold For Negative $40 Million

http://www.slate.com/blogs/moneybox/2013/08/03/pensions_included_boston_globe_sold_for_40_billion.html

by dkoch • 13 years ago

45 33 13 years ago

Uh.... that's not how math works.

What you mean to say is "The Globe sold for $70 million, but if you think about the pension obligations, the buyer is really paying about $180 million for it." which is very different from the "sold for -$40 million", which isn't even a thing that makes sense.

snewman• 13 years ago

No, the seller is retaining responsibility for the pension. Imagine that the Globe was worth $X including pension obligations. Then the Globe unencumbered by pension obligations should be worth $X+110M. The sale price implies $X+110M = 70M, so X = -40M.

jthol• 13 years ago

That's not what the article says.

That's because the terms under which John Henry is buying the paper stick the New York Times Company with the Globe's pension obligations, which are said to amount to around $110 million. Which is to say that the worth of the overall Globe enterprise is negative $40 million, not $70 million.

emphasis added

jessedhillon• 13 years ago

The seller is keeping the obligation to pay for $110M in pensions. So from the seller's standpoint they -- assuming all rights to profits are surrendered -- are walking away from the Globe with a $110M long-term obligation and $70M in cash, stock or whatever. Still not equivalent to saying it's a $40M loss since the pensions will be paid out over presumably a much longer time than the sale payments will be received.

rayiner• 13 years ago

I'm assuming the pension liabilities are quoted in present value terms, which is usually the case.

badman_ting• 13 years ago

I disagree, the math makes sense to me. Seller kept pension obligations, buyer didn't take them on.

yesimahuman• 13 years ago

What's even more shocking is that the Globe has been doing great journalism—winning Pulitzers, etc.—and even turning a modest profit. But that's the difference between a growing industry (where Tumblr can sell for $1 billion with no profits or even meaningful revenue in sight) and a shrinking one.

Well, do any startups offer pensions? Maybe that has more to do with it...

andrewhillman• 13 years ago

It's kind of funny that the Globe was purchased for $1.1B 20 years ago and Tumblr was acquired for this amount in 2013.

adw2• 13 years ago

Yes. Don't most funded startups have 401Ks?

japhyr• 13 years ago

There is a huge difference between a pension and a 401k. If my understanding is correct, an employer only contributes to an employee's 401k while they are working. There is no future obligation to the employee.

An employer who offers a pension effectively says, "if you work for me x years, I will continue to pay you y salary for the rest of your life."

jccooper• 13 years ago

No sane new organization offers pensions. Joint contribution individual accounts (like the 401k) are much more reasonable.

Any old org with pensions and half a clue should be scrambling to get out from under them.

Tarrosion• 13 years ago

Or perhaps the old parent company views pensions as an already sunk cost, and thus irrelevant, and thinks the actual operations of the paper are worth, you guessed it, $70M.

mynameishere• 13 years ago

You'll see more of this. Judging from his wiki entry, John Henry (who names a kid that?) is apolitical, but when the NYTimes, LATimes, etc, finally get completely sold to Carlos Slim or a Saudi Prince or whoever, the editorial direction of the country will get more and more one-sided.

It's amazing any newspaper is still in business, but eventually it will be strictly a subsidized game.

nhebb• 13 years ago

John Henry is not listed in opensecrets, but newsmeat shows his campaign contributions. he doesn't appear to be apolitical:

http://www.newsmeat.com/sports_political_donations/John_W_He...

ams6110• 13 years ago

More one-sided? Most of the big dailies in the USA are already solidly left, editorially. Which way do you see the balance tipping?

jawnb• 13 years ago

[citation needed]

btilly• 13 years ago

A good comment that I heard in personal conversation from a newscaster over a decade ago sums up most of the traditional media.

The line reporting staff overwhelmingly tend to be left wing. The owners tend to be extreme right wing. Which way the media goes on a particular issue depends on whether it raised to the personal attention of the owners or was left to the staff.

(Fox, of course, changed this by being right wing ownership that tried to make the whole outlet right wing..except for token liberals to provide the losing straw man arguments...)

chongli• 13 years ago

Left vs right is a smokescreen. To see where the newspapers really lean, look to what they don't publish at all.

MyDogHasFleas• 13 years ago

"What's even more shocking is that the Globe has been doing great journalism—winning Pulitzers, etc."

Wow! That buggy whip company is DOING GREAT! Some of their buggy whip makers just got awards from the Buggy Whip Makers Guild for their high quality buggy whips!

kingkawn• 13 years ago

Regardless of delivery method the actual work of journalism has a role that has value outside of the advertising used to support it. Any news company, web based or otherwise, should aspire to that same quality.

duaneb2• 13 years ago

You're right, journalism is completely old fashioned and we can just do with pundits and gossip.

...

Have you gone mad? The medium is irrelevant to the content.

JumpCrisscross• 13 years ago

I think the argument is that Pulitzers are a low-meaning metric for journalistic quality today given that they're awarded by an (allegedly irrelevant) subset of the media. I read the "buggy whip" part as humorous garnishing.

pbreit2• 13 years ago

Your analogy makes no sense. Journalism is hardly outdated.

6d0debc071• 13 years ago

I wonder what they jettisoned in terms of other liabilities though.

penguindev• 13 years ago

The article raises a decent point, but yes the -40 is obviously misleading. Why would anyone sell it for negative instead of just liquidate it? When NYT bought the paper it essentially paid 1bil + 100mil-ish assumption of pensions. Now when it sold it, it only got 70 mil.

It's better to correctly restate the purchase price, rather than make the selling price negative. But that wouldn't generate click throughs.

Edit: This is related to the Enterprise Value concept of a company. You include liabilities in this calculation when calculating a buyout valuation (not sure if that includes pensions or not; I don't do stocks anymore now because it's all just a giant federal reserve hedge fund)

Edit 2: wikipedia says EV should include unfunded pensions, which makes rational sense.

Maven9112• 13 years ago

This math is wrong. The pension obligations are liabilities and not an immediate expense. Many companies have huge pension liabilities along with monstrous amounts of debt. What you need to look at is the equity, in other words assets - liabilities, and if that equity figure is more then 70 million, then the purchaser got a discounted deal.

spikels• 13 years ago

No you are confusing the price (or market value) of a company and it's balance sheet. For many reasons the price that a company sells for is almost never the same as the shareholder's equity (i.e. equity = assets - liabilities). First not all assets or liabilities are marked to market (i.e. regularly revalued) generally because some are hard to accurately value (e.g. IP, brand, customer relationships). Second neither assets nor liabilities consider the expected future profits of the company. Third the value of something depends on the buyer and seller as they many have different opinions. Forth the value of an entire or large portion of a business is different than a small portion (control premium). And these are only some of the most important reasons - there are many more!

Just take a look at any publicly traded company. The market value of the equity (i.e. market cap) almost never be the same as the shareholder's equity. And if you wanted to buy the entire company you would almost certainly have to pay more than market cap.

Maven9112• 13 years ago

Sure, that I know that book values doesn't equal market values. But what was being proposed was that the pension liability is an immediate expense that should be added to the purchased price of the acquistion -- which is something that does not make sense at all.

When You Account For Pensions, The Boston Globe Sold For Negative $40 Million

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