It almost feels like a game of one-upmanship.
Earlier this week, Mexican billionaire Carlos Slim Helu made a deal to invest $250 million in ailing media conglomerate New York Times Co. (NYSE:NYT).
The terms are rich. Slim yields 14.053% in annual bond payments and gets warrants to purchase 15.9 million class A shares of New York Times for $6.3572 each, a 7.6% premium to Monday's close (before the deal was finalized).
If that deal sounds better than what Warren Buffett extracted from Goldman Sachs (NYSE:GS) and General Electric (NYSE:GE), it is. Maybe. Slim gets a higher guaranteed return -- 14% versus 10% -- and risks less capital than the billions Buffett spent for preferred shares of Goldman and GE.
On the other hand, what would you rather own? New York Times? Or Goldman and GE? Our 125,000-strong Motley Fool CAPS calls this one a no-brainer:
|
Metric |
Goldman Sachs | ||
|---|---|---|---|
|
CAPS stars (5 max) |
* |
**** |
*** |
|
Total ratings |
310 |
12,251 |
5,155 |
|
Percent Bulls |
37.4% |
93.3% |
90.1% |
|
Percent Bears |
62.6% |
6.7% |
9.9% |
|
Bullish pitches |
23 of 68 |
2,088 of 2,261 |
755 of 838 |
Data current as of Jan. 22, 2009.
"[New York Times] has an illiquid balance sheet. It is also loss making and distributes an unsustainable dividend. It operates in one of the most loss making industry: newspapers publishing," wrote CAPS All-Star cashsage earlier this month.
Good point. The news from New York Times and peers like Gannett (NYSE:GCI) and McClatchy (NYSE:MNI) is rarely good. Gannett, for example, says that it is very close to shuttering the Tucson Citizen, an afternoon paper.
So is why is Slim buying now? Returns. "We think it's a great brand," Helu deputy Arturo Elias told ABC News. "We think it's a good financial opportunity. And that's what we thought to make these investments."
No talk of a turnaround; it's just a good deal for Slim. One that we common Fools can't get. Don't get sucked in.
Get your clicks with related Foolishness:
- Can you buy it like Buffett?
- One of these newspaper stocks is likely to die.
- Maybe newspapers will be next to be bailed out.
