A $100 Million Bid for the Boston Globe May Not Exactly Be $100 Million

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The New York Times, which bought the Boston Globe for $1.1 billion 20 years ago, is now accepting bids for the company.

The New York Times Co., which put the Boston Globe up for sale in February, is expecting bids in the range of $100 million today, a tidy sum for a shrinking business.

But $100 million may not exactly be $100 million when considering what are likely to be complicated structures to some of these deals.

At issue is the Boston Globe’s pension liability, which currently stands at about $110 million, according to people with direct knowledge of the matter. Bidders are likely to assume all or a portion of that $110 million as part of their offering price, thus boosting the value of their bid.

Imagine an offer going like this: $30 million in cash upfront, and we assume 70 percent of the pension.

The potential problem with that kind of offer is that if the new company isn’t able to fund the pension somewhere down the line, it reverts back to the Times, meaning they’ll continue to have to foot the bill. That’s why the Times would rather have more cash up front — ideally $110 million — so it can wipe away the Globe’s pension liability.

There’s also a complexity involving overhead costs. The Globe still relies heavily on the Times for many of its corporate services such as human resources, computer and phone management, and payroll — costs that a new buyer may not be able to immediately absorb.

Bidders will likely seek assurances from the Times that it will continue to offer these services during a transition period, but at a discounted rate, according to people familiar with the auction process. That would make a $100 million offer look even smaller.

Of course, it’s all pennies when considering the Times bought the Globe 20 years ago for $1.1 billion. Today, they may just be glad to get the Boston newspaper off their books.

 

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