NY Times Finds Buyers for Fenway (GS) (NYT)

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The New York Times Company (NYT), one of the leading diversified media company has finally got buyers for its minority stake in the Fenway Sports Group. The newspaper publisher in a marathon sale process was looking for buyers since 2008 to give a boost to its declining revenue while managing its debt.

Going with the news, New York Times sold 390 Class B units of Fenway Sports Group, which accounts for approximately 55.7% of its total stake in the company for a sum of $117.0 million. The deal is expected to provide New York Timesa pre-tax gain of $64.0 million in the third quarter of fiscal 2011. However, the names of the buyers were not disclosed by the company.

Following the sale process, New York Times is left with 310 Class B units and is exploring its opportunities with viable buyers for the remaining stake. In 2009, the company engaged Goldman Sachs Group Inc. (GS) to sell its stake in Fenway.

New York Times bought 17.75% (750 Class B units) ownership in Fenway for a price of $75.0 million in 2002. However, the company was forced to look for alternatives such as sell of non-core assets for generating cash to combat the recession in 2008. New York Times sold 50 of its 750 units to the major shareholder in Fenway, John Henry, a commodities hedge-fund billionaire.

Fenway Sports Group is the owner of Red Sox base ball team and Liverpool of the English Premier League. Apart from this, the company holds 80% of the New England Sports network and 50% of Nascar's Roush Fenway Racing.

In an effort to offset the declining revenue and shrinking market share, publishers are scrambling to slash costs. The New York Times Company in the recent past has been realigning its cost structure, and streamlining its operations to increase efficiencies, which in turn, have improved its operating performance.

However, advertising remains a significant source of revenue for the company, which in turn, depends upon the health of the economy. The macro-economic factors such as sluggishness in business spending, high unemployment and falling home sales may adversely affect the level of national, retail and classified advertising revenues, as advertisers cut their budget in response to weak economic conditions.

Currently, New York Times' shares maintain a Zacks #3 Rank, which translates into a short-term Hold rating. Our long-term recommendation on the stock remains Neutral.

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