Slim/NY Times: Carlos Slim has succeeded where rival moguls have recently failed. The Mexican billionaire appears to have made a tidy profit investing in the newspaper trade.
After coming to the New York Times Co's rescue a year ago next Tuesday, his investment in the US newspaper group is in the money. By contrast, Rupert Murdoch's News Corp wrote down most of the value of the Wall Street Journal's publisher and Sam Zell's Tribune went thoroughly bust.
The question now is whether Slim will stick around to make even more money. Unlike Murdoch's $5.7 billion takeover of Dow Jones, the tycoon who made his fortune running Mexico's telecoms monopoly has said he has no ambitions of becoming a media baron. Slim has said his bet on the Gray Lady's parent was purely financial and he has no intention of challenging the Sulzberger family's control.
Slim's wager came in two stages. First, in 2008 he snapped up 6.4 per cent of the newspaper's shares in the open market at around $13.53 a share. The stock tanked soon after. It fell by more than half before Slim doubled down by lending the group $250 million a year ago next week. That led some to believe Slim's passion for owning a prestigious newspaper overtook his financial judgment.
To the contrary, his investment now looks fiscally astute. The stock has rebounded sharply, and though it has slumped this week, it's still trading close to the price Slim paid when he bought his original stake.
Second, the loan with its 14.1 per cent interest rate not only has generated an annual income stream of $35 million, but came with warrants over 15.9 million common shares. With a strike price of $6.36, those warrants are around $110 million in the money.
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So one year on from his assistance operation with the Sulzbergers, who control the company's board with two classes of stock, Slim is in a position to protect his upside from what is still a precarious industry. He can exit the stock purchased in September 2008 while retaining warrants to buy the shares at half the prevailing market price of around $13.28. Meantime he can collect healthy interest payments.
True, selling such a big chunk of stock wouldn't be a cinch, and the very sight of Slim reducing his stake might send the share price tumbling further. But even if that were to happen, Slim has built in a comfortable cushion to remain in the money — giving him justified bragging rights over his billionaire rivals north of the border.
