|May 5, 2010|
|Washington Post Co. Revamp Starts with Newsweek Sale|
|By Kevin McCauley|
|Restructuring of the Washington Post Company officially began today with news that chairman Don Graham has hired Allen & Co. to find a buyer for Newsweek. |
A gallant attempt was made to revive Newsweek, but the concept of a weekly glossy magazine is downright quaint in today's fast-paced communications world.
Divestiture of the No. 2 newsmagazine will slice $200M in publishing annual revenues from WPC, providing its Kaplan education/training unit an even larger percentage of total sales. Kaplan accounted for 56 percent of WPC's overall $4.6B revenues.
Graham has long told Wall Street that he wants to be known as head of an educational company, rather than a media operation. That's not going to happen unless he either changes the corporate name or sells/spins off the D.C. flagship.
The Washington Post is an American institution. If WPC decides to sell, there will be plenty of takers. Graham doesn't have to look too far.
Berkshire Hathaway CEO Warren Buffett is an investor in WPC, owner of 18.7 percent of Class B stock. Buffett, whose BH owns the Buffalo News, recently expressed interest in the bankruptcy court auction of the Philadelphia Inquirer/Daily News.
The Washington Post would be a prestige addition to the BH’s holdings.
Graham and other family members control Class A shares that appoint 70 percent of the board. They can do whatever they like with the company.
Class B shareholders, however, are getting hammered by the newspaper albatross. Class B shares traded for more than $950 six years ago. They currently sell for $502.
Healthy financial returns would flow from a company called Kaplan. For inspiration, Graham should take a look at another closely held media operation, E.W. Scripps Co. The Scripps family went public in 1988, offering shares for $8 each. Twenty years later, E.W. Scripps spun off its fast growing cable programming (Food Network, HGTV and Travel Channel) unit.
Scripps Networks Interactive now boasts of shares trading at $45 each, while E.W. Scripps newspaper stock bumps along at $10.15. The SNI spin-off unlocked the value of its cable content.
Cutting Newsweek demonstrates that Graham has no emotional ties to the media. The magazine has been part of the Washington Post Co. family since 1961. A similar hard-headed decision should be made about the future of the Washington Post ($679M revenues) and its TV operations ($950M).
Class B shareholders anxiously await.
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