MEXICO CITY – A Latin American billionaire looks to expand his empire in the United States in a deal that could make him the largest shareholder of The New York Times Co.
The $250 million investment by Mexican tycoon Carlos Slim could provide some synergies with his telecommunications holdings in Latin America, analysts say.
Perhaps more importantly, Slim, reputed to be the world's second-richest man, would gain the prestige of owning one of the world's best-known and most influential newspapers.
"By having a stake in the New York Times, he's basically projecting himself as a powerbroker in this country, regardless of how his investment does," said Armand Peschard-Sverdrup, a senior associate of the Center For Strategic and International Studies, a Washington think tank.
The Times announced late Monday the financing agreement with Slim's companies Banco Inbursa and Inmobiliaria Carso for $125 million each. Times President Janet L. Robinson said the cash infusion will be used to refinance existing debt and will provide the company with increased financial flexibility.
Slim's office declined comment before the Times' announcement.
The Times, which also publishes The Boston Globe and International Herald Tribune, has been trying to conserve cash as advertising revenues continue to slide. Newspaper publishers across the country are hurting amid the economic downturn and as advertisers shift spending online. The Times slashed its quarterly dividend by 74 percent in November and plans to raise $225 million from its new, 52-story Manhattan headquarters, either by selling the building and leasing it back or borrowing against it. It also put its stake in the Boston Red Sox up for sale.
In September, Slim and members of his family purchased 6.4 percent of the company's publicly traded shares. The Times said the value of Slim's investment has since fallen to $58 million from $128 million.
The Times reported that Slim would buy six-year notes in the company with warrants that are convertible to common shares. The notes carry a 14 percent interest rate, with 11 percent paid in cash and 3 percent in additional bonds, the newspaper reported.
Those terms could be similar to those insisted upon by Warren Buffett, when he invested billions in Goldman Sachs Group Inc. and General Electric Co., with the promise of 10 percent annual dividends.
Slim would get no representation on the Times' board, and no special voting rights. But when he exercises the warrants, he would own up to 17 percent of the company's common stock, becoming its largest shareholder, the Times reported. The Ochs-Sulzberger family owns about 19 percent of the company but controls it through a special class of supervoting shares.
Slim is part of a crop of emerging-market billionaires, from Mexico to Russia, who are on a shopping spree now that the recession has slashed the prices of some of America's best-known companies.
Slim recently upped his stakes in Saks Fifth Avenue, and his Inbursa brokerage in Mexico bought at least $150 million of Citigroup's sinking shares.
"A lot of foreign business tycoons are bargain shopping, and this is something the U.S. has no choice but to get used to," Peschard-Sverdrup said. "We're going to have all these various foreign interests owning various U.S. assets. It's one of the things that the recession ultimately has accelerated."
Some investments seem risky at best. Retail electronics tycoon Ricardo Salinas Pliego, another Mexican billionaire, raised his stake in bankrupt Circuit City to 28 percent before the company announced last month that its U.S. stores will go out of business.
Slim has built his fortune by turning troubled companies. He learned how to make his money from his father, a Lebanese immigrant and Mexico City shopkeeper who bought cheap property.
Slim got his start in the cigarette business and made it big in 1990, taking control of Mexico's state-owned telephone monopoly. Telefonos de Mexico SA, or Telmex, still operates more than 90 percent of the nation's fixed-line phone services, while his America Movil SAB is Latin America's largest mobile phone service provider.
"He transformed a state-owned company into one of the most profitable businesses in the country," said analyst Jose Coballasi of Standard & Poor's in Mexico City.
Now worth an estimated $59 billion, Slim owns hundreds of businesses in Mexico, from bakeries to clothing stores to record shops and drug stores. His industrial-retail conglomerate Grupo Carso is solid, enjoying liquidity despite the crisis, Coballasi said.
Opponents say Slim, 68, runs ruthless monopolies that illegally block competitors, and is known for hostile takeovers. After Slim boosted his stake in Saks from 17.2 million shares to 25.3 million shares late last year, the company's board introduced a "poison pill" into its share structure, apparently to prevent a Slim takeover.
Slim has said he knows how to seize an opportunity. These days, there is no better place to buy businesses on the cheap than the United States.
"I don't see him meddling," said George Grayson, a Mexico expert at the College of William & Mary in Virginia. "Those of us who read the New York Times everyday, I think will be uncorking champagne bottles because unless these papers are infused with capital they are going to cut back services."
The Times Co. reported having about $46 million in cash and $1.1 billion in debt in September. A $400 million loan expires in May.
"The New York Times needs money in the next few months, and Slim has it," said Shannon K. O'Neil, a Latin American expert at the Council on Foreign Relations in New York. "So in this sense, he could help save it by providing essentially a loan for the paper, to provide them time to make the changes necessary to adjust to the changing media world and become more profitable again."