Amazon founder Jeff Bezos Buys Washington Post $250 Million -Newspapers are New Billionaire Trophys
Amazon founder Jeff Bezos Buys Washington Post $250 Million – helping put together the newspaper sale Allen & Company.
Washington Post Company‘s chief executive, Donald E. Graham, hired the boutique investment bank some unspecified time ago. The Post Company’s board spoke with a “half-dozen” possible buyers before settling on Mr. Bezos, whose net worth was estimated by Forbes earlier this year at about $25.2 billion.
Donald Graham and Jeff Bezos were both at Allen & Company’s annual conference in Sun Valley, Idaho, last month. The high-powered gathering of media and technology moguls may have lent cover for the two to cement the deal announced on Monday, the biggest in the newspaper industry since Cablevision bought Newsday for $632 million five years ago, according to Standard & Poor’s Capital IQ.
Mr. Bezos and Mr. Graham have longstanding connections that may have helped the discussions. As The Post’s article notes, Mr. Graham gave the Amazon chief advice on how to promote newspapers on the Kindle device. And Amazon is an investor in LivingSocial, an e-commerce venture led by Tim O’Shaughnessy, Mr. Graham’s son-in-law.
Jeffrey P. Bezos is paying cash for The Washington Post out of his own personal wealth, currently estimated at more than $25 billion.
Just $250 million.
That’s all Jeffrey P. Bezos paid on Monday for The Washington Post, which was once worth several billion dollars.
$70 million. That’s all John Henry paid on Friday for The Boston Globe, a paper The New York Times had acquired for $1.1 billion in 1993.
Bezos, the chief executive of Amazon.com, is paying cash for The Washington Post out of his own personal wealth, currently estimated at more than $25 billion. The Post will cost him roughly 1 percent of what he owns in Amazon stock alone.
Some billionaires like cars, yachts and private jets. Others like newspapers.
“Newspapers have gone from the public markets to the hands of a relatively few billionaires who have an appetite for social, civic and financial roles,” Mr. Doctor said.
Based on the math, it is hard to justify a $250 million valuation for The Washington Post. The company reported it lost nearly $50 million for the first half of the year on its newspaper operation that generated $138.4 million in revenue. Of the $50 million loss, nearly $40 million was a noncash pension expense. So you could argue that the company lost only $10 million on operations. But it lost $33 million in the first half of 2012, too, also including pension costs. Circulation fell about 7 percent in the first half of 2013.
At the end of last year, the company valued its newspaper assets at $293.6 million, no doubt a generous figure.
For the Washington Post Company, which will remain publicly traded and renamed, probably to reflect its focus on its education business, Kaplan, and its television stations, the sale of the newspaper represents a very small part of its business. The Washington Post Company’s market value is $4.2 billion.
But the newspaper, which has been owned by four generations of the family since 1933, was not just a business.
Underscoring the size of the newspaper to the company, Katharine Weymouth, publisher of the newspaper, justified the sale by saying this in an interview with The Washington Post: “If journalism is the mission, given the pressures to cut costs and make profits, maybe (a publicly traded company) is not the best place for The Post.”
By taking the newspaper private, Mr. Bezos can afford to be a patient owner. Profit and loss is probably the least of his concerns. A running joke on Monday was this from Ben Popper, the editor at the Web site the Verge, on Twitter: “Jeff Bezos has reputation for building great companies with little to no profit, perfect guy to own a newspaper.”
While Mr. Bezos may not be buying the paper for immediate profits, it may not be entirely altruistic either. His parents, Jackie and Mike Bezos, run the Bezos Family Foundation, which is not expected to be involved in the business.
As part of the deal, Mr. Bezos is assuming the pension obligations of the current employees of the newspaper. Compared with the deal John Henry, owner of the Boston Red Sox, struck for The Boston Globe on Friday, Mr. Bezos looks like a lavish benefactor. Mr. Henry paid $70 million, but The Boston Globe has approximately $110 million in pension obligations, which The New York Times Company is keeping on its books.
The Washington Post Co.’s newspaper division has suffered a 44% decline in operating revenue over the past six years, the company said. The Post is the most prominent part of the print business. Its online operation is one of the most popular news sources, but print circulation has dwindled, too, falling another 7% daily and Sundays during the first half of this year.
The parent company’s 2012 revenue of $4 billion was down 12% from 2010’s 4.6 billion. Net income fell 53% to $131.2 million.
The newspaper operations lost $49 million in the first half of 2013, down from a loss of $33.2 million a year. Newspaper revenue was down only slightly in the first half, largely because of gains in online advertising. Post’s daily circulation fell 7.1% and 7.6% in the first half of the year to 447,700. Its Sunday circulation was down 7.6% to 647,600.
The paper’s fortunes weighed on insiders and family members until a decision was made to shop the newspaper. Bezos was one of six potential bidders. He and Donald Graham have been friends for some time, and Graham discussed the design of Amazon’s Kindle e-reader.
One of those undoubtedly consulted on the deal was Warren Buffett, chairman of Berkshire Hathaway (BRK.A +0.45%). Berkshire has a 23% stake in the Washington Post Co. Buffett bought into the Post in 1973 and had a cost basis of $11 billion. Business Insider estimated that Berkshire’s gain was 9,000%.