Washington Post sale: Details of Bezos deal

Correction: An earlier version of this story said the Robinson Terminal that The Washington Post Co. owns in Alexandria was part of the sale to Jeffrey Bezos. While the corporate entity that owns them is to be transferred, the actual warehouses and wharves there are not part of the transaction. The article also incorrectly identified the holding company through which Bezos will take ownership. It is Nash Holdings LLC. The holding company named in the article, Explore Holdings LLC, is the guarantor of the transaction. This version of the story has been updated.

Donald Graham, the Post Co. chairman and chief executive, explains why he came to believe Amazon founder Jeff Bezos offers the Post the best chance to thrive after 80 years of Graham family ownership. (The Washington Post)

The purchase of The Washington Post by Jeffrey P. Bezos ends 42 years in which The Post has been part of a publicly traded company, creates a small windfall for the company’s shareholders and will leave the stewardship of the newspaper in the hands of a privately held firm.

When Bezos, the founder and chief executive of Amazon.com, closes on the $250 million purchase of the paper in about 60 days, it will be the latest in a series of purchases of “legacy” print media properties by wealthy individuals and small groups, a list that also includes the Boston Globe, the Philadelphia Inquirer and Newsweek.

The purchase price is richer than many of those paid for other legacy print media properties in recent years.

The New York Times Co. agreed to sell the Boston Globe to Red Sox owner John W. Henry for only $70 million. Newsweek sold for a symbolic $1, plus assumed pension liabilities, to billionaire Sidney Harman in 2011.

The Post “has a much stronger position in its market than the Boston Globe does,” said John Morton, an independent newspaper industry analyst. “It doesn’t surprise me that it would command a much higher price.”

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The major events that have shaped the Washington Post Co.

Still, Morton suggested that the prominence and the visibility of The Post made Bezos willing to pay a higher price than would be justified by the paper’s finances alone. “I think probably Jeff Bezos was willing to pay a premium to make this happen,” Morton said. “. . . Bezos has enough money that if he wants to make it a hobby, he can.”

The deal was announced after the end of trading Monday. In after-hours trading, Washington Post Co. shares rose about 5 percent to $568. The company’s stock is up nearly 57 percent this year. The purchase price works out to $40.32 a share for Post shareholders.

The transaction is a reflection of how much has changed in the news industry in just a short time amid the rise of online media that have put print advertising business models under steep pressure.

“This newspaper would’ve sold 10 years ago for $2 billion,” said Craig Huber of Huber Research Partners.

Notably, Bezos — through a new holding company called Nash Holdings LLC— will be buying only the Post newspaper and closely held related ventures.

The purchase does not include The Post Co.’s downtown Washington office buildings (currently on the market as The Post considers leasing new space in a cheaper neighborhood) or the wharves and warehouses owned as part of the Robinson Terminal facility in Alexandria.

It also does not include some of the cash-cow media-related businesses owned by The Post’s parent company. For example, the Post Co. subsidiary that owns local television affiliates across the country, Post-Newsweek Stations, is not part of the deal. Stand-alone ventures the Slate Group, The Root and Foreign Policy are also to remain part of the legacy Washington Post Co.

It is the end of an era for The Washington Post Co., which will change its name. It had already shifted its identity from that of a media company to an “education and media company,” as the education unit Kaplan grew, the Post newspaper shrank and the company sold Newsweek. The company first issued shares to the public in 1971 and has more recently expanded into a grab-bag of seemingly unrelated businesses, including a hospice-care company and a maker of industrial boilers.

Bezos’s new private company will own the Post newspaper and Web properties, along with Express, the Gazette Newspapers and Southern Maryland Newspapers in Washington’s suburbs, El Tiempo Latino, and specialty publications including New Homes Guide and Apartment Showcase.

The Post newspaper division had $582 million in revenue in 2012 and a $53.7 million operating loss.

Still, for Bezos, the purchase should be financially manageable. He is worth about $25.2 billion, according to estimates by Forbes, which means the $250 million purchase price is about 1 percent of his net worth.

And industry analysts do not see any easy fixes Bezos might make that could make The Post dramatically more profitable soon.

“I don’t think there’s any low-hanging fruit on the revenue front or the cost front, or else The Post would’ve done it already,” Huber said.

Ylan Q. Mui is a financial reporter at The Washington Post covering the Federal Reserve and the economy.
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