Apparently it wasn’t bad enough that the New York Times Co. got seven cents on the dollar for its 20-year ownership of the Boston Globe (and the Worcester Telegram & Gazette – we’re no John Henry!).
Now comes news from Fortune (via Mediabistro’s Morning Media Newsfeed) that the Times Co. took an even worse beating.
How being a tax dummy cost The New York Times $60M
A mistake made 20 years ago cost the Times big during the sale of the Boston Globe.
FORTUNE — The New York Times Co.’s (NYT) purchase of the Boston Globe for more than $1 billion 20 years ago has turned out to be among the worst single newspaper acquisitions in history. But guess what? It’s even worse than it looks.
How is that possible? Because the Times not only made a disastrous, overpriced purchase, but also used a tax structure that assumed that it would own the Globe forever. As a result, the Times Co., which unloaded the Globe for a pittance last month, is missing out on a tax break that would have been worth almost as much as the “approximately $70 million” that Boston Red Sox owner John Henry paid for the Globe and its other financially disastrous Massachusetts purchase, the Worcester Telegram & Gazette.
What follows is a Talmudic reading of the tax code as it relates to the sale of the Globe, for which the Times Co. paid Globe parent Affiliated Publications $1.028 billion – $160 million in cash and $868 million in Times stock. But apparently the Timesniks structured the deal the wrong way.
Had Times done the deal by using a corporate structure that goes by the marvelous name of “horizontal double dummy,” it would have been able to add the $160 million cash portion of the price its “tax basis” in the Globe: the value it placed on the Globe for tax purposes. However, for reasons that aren’t clear — the company declined comment — it used a different technique. As a result, its tax basis in the Globe was the same as Affiliated Publications’ basis rather than being $160 million greater.
Either way, Fortune’s senior editor-at-large Allan Sloan comes to this entirely predictable conclusion: “When acquirers buy a shiny new toy, they usually fail to structure the deal with a possible future sale in mind. Which, I suppose, makes them … double dummies.”
UPDATE: Times spokeswoman Abbe Serphos told Politico’s Dylan Byers: “That tax structure was determined 20 years ago and the rest is conjecture.”
I’d say you’re spoiled for choice with “horizontal double dummy,” but that’s just conjecture.
Makes as much sense as anything, Mick.
At least the Oches/Sulzberger empire gets a massive tax write-off for their brilliant purchase and management of this crown jewel of a property.
That must make the shareholders real content with the Publisher.
…And wasn’t Pudge the one we saw holding hands with Judith Miller skipping along the sidewalk when she got released from jail after protecting her source on the WMDs in Irag?
That would be Pinch, not to get technical about it, Mudge.