The Biz Blog

Looking from the outside in, some analysts and I have doubted that the New York Times Co. is all that eager to sell The Boston Globe. The paper is unlikely to fetch much of a price right now, so why not wait for the economy, and the company's value, to improve?

Talking last week with someone involved firsthand in the sales negotiations, I was alerted to a factor I hadn't considered: taxes.

 

Specifically, booking a loss this year on the sale of the Globe and/or its sister paper, the Worcester Telegram & Gazette, would offset capital gains on some of the other properties the Times Co. has shed recently.

 

Times Co. CEO Janet Robinson is on the record saying the company expects to close by the end of the year on the sale of its 17.75 percent share of the Boston Red Sox and the associated New England Sports Network. The Times Co. spent $75 million for that in 2002, and it could fetch at least twice that much.

I'm no tax attorney, but I believe the Globe loss also could be applied to gains on its $575 million sale of nine local television stations in 2007, July's sale of classical radio station WQXR for $45 million and the sale of part of the Times' new headquarters building for $225 million in March.

WQXR was acquired in 1946 and the TV group was assembled gradually over decades, so the proceeds on both probably were mostly taxable gains. (A Times Co. spokeswoman declined to discuss any aspect of the sales in progress, including possible tax implications.)

Corporations can use capital losses only to offset capital gains (not against earned income, as individuals can). The losses can be carried forward or applied as a credit against capital gains incurred in the last three years.

Two bidders -- Platinum Equity of Beverly Hills and a group led by members of the Taylor family, which sold the Globe to the Times for $1.1 billion in 1991 -- remain in the running for the Boston paper. Firm bids are reportedly due in early October.

Robinson and Times chairman Arthur Sulzberger reassured Globe employees earlier this month that the company does not feel forced to sell the two New England papers if the terms are not advantageous. But through the summer and early fall the company has acted swiftly, engaging Goldman Sachs as an adviser, obtaining three preliminary bids and moving on to site visits and a deadline for final bids. Such transactions can drag on for nine months to a year, but the Times appears to be fast-tracking this one.

 

I don't think taxes alone would impel a sale. The Times Co. may also fear getting stuck with another round of operating losses (or find itself forced to lay off more employees, with renewed labor upheaval). Also, the company may have worn out its welcome both inside the paper and with Bostonians, who would welcome a Taylor family restoration.

 

For a look at how taxes can affect the timing of a sale, consider McClatchy's surprise unloading of The Star Tribune in Minneapolis on Dec. 26, 2006. In retrospect, the sale price of $530 million was a shrewd deal, considering the industry downturn that followed and the subsequent bankruptcy of The Star Tribune.

 

At the time, though, it seemed shocking that McClatchy would sell its largest-circulation paper. The company's press release highlighted the tax advantages. Booking a loss late in the year on the Strib, for which it had paid $1.2 billion in 1998, would net an additional $160 million in tax savings when applied against capital gains the company had realized in the sale of a dozen former Knight-Ridder papers.

 

I spoke by phone with veteran analyst Ed Atorino of the Benchmark Co., who like me expressed skepticism earlier this year about the likelihood of a Globe sale. He said that tax advantages would factor in favor of selling and added that closing a transaction this year would "let [the company] go into 2010 with a clean slate."

 

There are no sure things in the volatile business of putting together newspaper deals. But I'm beginning to think that by next year we will see one of two fascinating scenarios. It could be Platinum taking on an even bigger metro, with bigger problems, than The San Diego Union Tribune, which it bought in March. Or it could be cousins Stephen and Benjamin Taylor applying local knowledge and family tradition to the problems of the battered Globe.