Por Favor: NYTCO Seeks Investment From Mexican Billionaire

Carlos SlimIn dire financial straits, the New York Times Co. is negotiating with Carlos Slim, a Mexican billionaire, according to The Wall Street Journal, which reported the news on Monday. In September, Slim picked up a 6% share of NYTCO for $127 million; the deal under discussion could give the company another $250 million--and triple Slim's share of the company. 

Several issues remain to be settled, according to unnamed sources cited in this report, including the type of stock to be sold to Slim. One possibility is a grant of preferred stock, which doesn't vote but carries a guaranteed annual dividend.

Slim, however, may push for some of the company's "Class B" stock, held almost exclusively by the Ochs-Sulzberger family. "B" allows them to control the majority of the NYTCO board of directors; "Class A" common stock appointing a smaller number of directors.

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In the past, this two-tiered share system has come under fire from investors and investor advisement services, including Hassan Elmasry, a portfolio manager with Morgan Stanley, and Harbinger Capital and Firebrand partners--which forced NYTCO to add an extra director to the board in March 2008, elected by "Class A" shares. The Ochs-Sulzbergers still maintain control of the majority of the board: 10-to-5.

The possibility of further investment by Slim has set tongues wagging over alleged unethical dealings in his past, including the obscure circumstances surrounding his acquisition of Telmex, Mexico's national telephone monopoly in 1990, and his close relationship to PRI, the entrenched and deeply corrupt political party that ruled Mexico from 1929 until 1997.

In 1990, Telmex was privatized by the Mexican government in a bidding process overseen by President Carlos Salinas, who directed sales of state-owned companies to benefit his supporters. In February 1993, Slim donated $25 million to PRI at a fund-raising dinner hosted by Salinas.

The president's brother Raul Salinas--who had a hand in the sale of Imevision (now TV Azteca) to another crony and possibly Telmex as well--was convicted in 1999 of ordering the assassination of Jose Francisco Ruiz Massieu, a top-ranking official in PRI, in 1994. Raul Salinas is also believed to have organized the murder of his own accomplice, PRI congressman Manuel Munoz Rocha.

The NYTCO has limited potential investors; it is beset by a long-term secular downturn in print ad revenues as well as the cyclical downturn caused by the recession. With a $400 million debt payment coming due in May, the company borrowed money against its new headquarters and is said to be trying to sell its share in the Boston Red Sox to raise money.

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