Graham is likely to continue to diversify company

The Washington Post may be the iconic brand on the company’s downtown building, but the sale of its flagship newspaper turns it into more of a holding company of businesses that have little in common — including education, television, home health care and even furnaces.

The new company — which will be renamed after the $250 million sale of The Post to Amazon.com mogul Jeffrey P. Bezos is complete — will resemble a mini-Berkshire Hathaway, whose owner, billionaire Warren Buffett, has been a mentor to Washington Post Co. Chairman Donald E. Graham. Buffett sat on the Post board for 20 years as its largest outside shareholder.

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What will be left after the sale of the newspaper.
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What will be left after the sale of the newspaper.

Freed from running a declining newspaper, the company will be able to focus on making its education business more profitable, analysts said.

“The businesses that now remain are growth businesses,” said Raul Fernandez, a local investor who sits with Graham on the board of the DC College Access Program. “They are solid, cash-flow-earning businesses. And, with the newspaper gone, now the Grahams and shareholders are going to get the benefit of that unleashed value.”

Although the transformation of the company rewards shareholders — the stock is up more than 50 percent this year — others worry about whether the Graham family will remain a force in the community without a powerful newspaper at their backs.

“Washington is a strange bird in terms of our politics,” said Donald L. Hense, founder and chief executive of Friendship Public Charter School. “Make sure you get to know who we are. I understand [Bezos is] in Washington state, but Washington, D.C., is not Washington state.”

All told, the newspaper division, the majority of which is being sold, constituted 15 percent of the $4 billion in revenue The Washington Post Co. generated in 2012. The newspaper publishing division lost $54 million last year, although the company reported a profit of $131 million. The company’s remaining holdings include real estate assets and small media properties, including Foreign Policy, the online magazine Slate, TheRoot.com and the Facebook application Social Reader.

The largest part of the remaining company — and the once-great hope for its future — is Kaplan, an education and test-preparation service that accounts for 55 percent of its revenue. But Kaplan has been restructuring as it faces congressional scrutiny of the for-profit education sector, and enrollment and operating profits have dropped rapidly.

One growth center will be the company’s television and cable properties. Phoenix-based Cable One, which has 720,000 customers in 19 states, accounts for 20 percent of Post Co. revenue and 37 percent of cash generation. Six local television stations in top markets such as Miami, Houston and Orlando produced 10 percent of revenue last year but account for more than half the company’s cash flow.

“Shedding its newspaper assets should only help to highlight the value of its cable and broadcast operations,” Westcott Rochette, a media analyst with S&P CapitalIQ, said in an analyst’s report Tuesday. He has a 12-month target stock price of $640, which includes the $250 million from Bezos. Washington Post shares closed Tuesday at $593, up 4.27 percent after the sale was announced Monday.

Graham is likely to use the money from the newspaper sale and the cash generated from television and cable operations to diversity into other businesses, Rochette said. The Post raised eyebrows when it bought two small companies, one in health care and one industrial, which were seemingly unrelated to its existing portfolio.

Graham’s new company will feature real estate assets. Before the sale of the newspaper, The Post hired two real estate consultants. One, Studley, has been marketing the headquarters at 15th and L streets NW in the District and the Robinson Terminal warehouses along the Potomac River in Alexandria. Those sales efforts are expected to continue through the to-be-renamed Post Co. and a buyer for the Alexandria properties is expected to be named as early as September.

The D.C. government estimates the value of the downtown properties — at 1150 15th St., 1515 L St. and 1523 L St. — at nearly $80 million. The value of the Alexandria properties could vary based on what prospective buyers plan to build there.

A question for some is what the Graham family’s role will be in the community. The company and its various charities blanket the cultural and educational scene, sponsoring events including jazz festivals, the Agnes Meyer Annual Outstanding Teacher Award and community outreach.

The Graham family through its own foundations has pumped millions over the years into various charities and causes.

Donald Graham said in an interview Tuesday that he plans to remain in Washington and that the region will continue to be the focus of his philanthropic efforts. “Whatever we do philanthropically will continue to center around here,” he said.

Said former D.C. mayor Anthony Williams, chief executive of the Federal City Council, a coalition of business leaders founded by Graham’s father, Philip Graham: “I would like to think that their involvement in the community has been so deep and so long-lasting that it’s going to continue. Owning and buying ink by the barrel is a unique capability, but I like to think Don will be able to use his other operations as well. Don is his own unique individual, but he has been a tremendous force for good.”

The nonprofit Philip L. Graham Fund was an early investor in Venture Philanthropy Partners, an organization formed and funded more than a decade ago by the region’s business elite to build better youth nonprofits. Carol Thompson Cole, the group’s president and chief executive, said the fund has supported “some of the most successful nonprofits in our portfolio,” including the Latin American Youth Center, Mary’s Center and the College Summit.

“I have no doubt that the Graham family will continue to play an integral role in the success of many important organizations and causes in this community,” she added. “We certainly hope that The Washington Post, under Jeff Bezos, will do the same.”

The city will miss having a daily newspaper with local ownership that is in touch with the city and its philanthropic needs, said Hense of Friendship Public Charter School. Katharine Graham, The Post’s late publisher and chairman of the company, and Donald Graham, he said, provided charter school and other civic causes with unmatched philanthropic and editorial support.

“You have had the persons, the company and the foundations all working for Washington, D.C.,” he said.

Mike DeBonis, Jonathan O’Connell and Alice Crites contributed to this report.

 
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