Why is the world's second-richest man investing in old media?
Some analysts are scratching their heads after Mexican billionaire Carlos Slim Helu revealed this week that he and his family had acquired a 6.4% stake in the New York Times Co., owner of the New York Times, International Herald Tribune, Boston Globe and 16 other daily newspapers.
Investors have been fleeing the stocks of U.S. newspaper companies, whose advertising revenues are plummeting because of the slow economy and continued migration of readers from print media to the Internet. New York Times shares in July slumped to a 10-year low.
But the stock jumped 9.1% on Thursday to $15.23 on word that the Mexican telecom tycoon has placed a bet on the Gray Lady. Slim owns 9.1 million shares of New York Times stock, according to a Security and Exchange Commission filing made public late Wednesday. The purchase makes Slim the third-largest shareholder outside the controlling Ochs-Sulzberger family. At Thursday's closing price, the Slim family's investment was valued at $138.6 million.
Slim, whose fortune is estimated at around $60 billion, has earned a reputation as a savvy bottom feeder who invests in quality brands that are undervalued. On Thursday a Slim spokesman characterized the investment as "exclusively a financial transaction" but declined to elaborate further.
The New York Times, the nation's third-largest paper by circulation, is a storied franchise that has developed a strong online presence and is in a better position than most media companies to weather the storm.
Still, Lauren Rich Fine, a former Merrill Lynch & Co. newspaper analyst, is dubious that Slim has spotted an opportunity that everyone else on Wall Street has missed.
Online advertising has been slow to materialize at the New York Times, while print revenue continues to slide. The company's largest investor, Harbinger Capital Partners, launched a proxy fight earlier this year to force changes in the way the company is managed, with only partial success. Slim's ability to influence decision-making at the family-controlled firm appears limited.
"He apparently does have a good track record of buying depressed assets and extracting value from them," said Rich Fine, who teaches media management at Kent State University. "But this is an industry that's in disarray. So it's really unclear what he's thinking."
Slim in 1990 headed a group of investors that bought Mexico's state-owned telephone company, Telmex, and turned it into a cash machine. His America Movil, a Telmex spinoff, is now Latin America's largest mobile phone company. His business empire also includes holdings in retail, construction, mining, banking and insurance.
Still, not every deal made by the man known as Mexico's King Midas has turned to gold. His $2-billion investment in CompUSA turned out to be a bust. The troubled electronics chain closed its doors last year.