
When You Account For Pensions, The Boston Globe Sold For Negative $40 Million - dkoch
http://www.slate.com/blogs/moneybox/2013/08/03/pensions_included_boston_globe_sold_for_40_billion.html
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yesimahuman
> What's even more shocking is that the Globe has been doing great
> journalism—winning Pulitzers, etc.—and even turning a modest profit. But
> that's the difference between a growing industry (where Tumblr can sell for
> $1 billion with no profits or even meaningful revenue in sight) and a
> shrinking one.

Well, do any startups offer pensions? Maybe that has more to do with it...

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adw
Yes. Don't most funded startups have 401Ks?

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japhyr
There is a huge difference between a pension and a 401k. If my understanding
is correct, an employer only contributes to an employee's 401k while they are
working. There is no future obligation to the employee.

An employer who offers a pension effectively says, "if you work for me x
years, I will continue to pay you y salary for the rest of your life."

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adw
Isn't that a final-salary pension as opposed to a defined-contribution
pension? They're both pensions. (Though I agree a final-salary scheme is much
more attractive, and as it happens, I have a couple of years in one from an
old gig.)

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jeffdavis
A 401(k) is essentially just a retirement savings account. Money goes in
regularly, the account has a specific balance, and any future obligations are
managed in a well-defined way by a bank or brokerage. There is no opportunity
to conflate the performance of the business with the ratio of savers to
pensioners or with the performance of the investment itself.

The other kind of pension, which we generally hear about in large companies or
governments, is indistinguishable (to me) from accounting fraud. The whole
point is to make the business (or government) look better today, and make big
promises today, and hide the costs and obligations far into the future with
optimistic projections.

I am not a lawyer or expert on this matter.

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fennecfoxen
Uh.... that's not how math works.

What you mean to say is "The Globe sold for $70 million, but if you think
about the pension obligations, the buyer is really paying about $180 million
for it." which is very different from the "sold for -$40 million", which isn't
even a thing that makes sense.

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snewman
No, the seller is retaining responsibility for the pension. Imagine that the
Globe was worth $X including pension obligations. Then the Globe unencumbered
by pension obligations should be worth $X+110M. The sale price implies $X+110M
= 70M, so X = -40M.

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jthol
That's not what the article says.

>That's because the terms under which John Henry is buying the paper ___stick
the New York Times Company with the Globe 's pension obligations_ __, which
are said to amount to around $110 million. Which is to say that the worth of
the overall Globe enterprise is negative $40 million, not $70 million.

emphasis added

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pbreit
Notice that your emphasized words clearly state that the NYT (the seller) will
pay the pensions, not the Globe's new buyer. So the article is correct.

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Tarrosion
Or perhaps the old parent company views pensions as an already sunk cost, and
thus irrelevant, and thinks the actual operations of the paper are worth, you
guessed it, $70M.

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mynameishere
You'll see more of this. Judging from his wiki entry, John Henry (who names a
kid that?) is apolitical, but when the NYTimes, LATimes, etc, finally get
completely sold to Carlos Slim or a Saudi Prince or whoever, the editorial
direction of the country will get more and more one-sided.

It's amazing any newspaper is still in business, but eventually it will be
strictly a subsidized game.

~~~
ams6110
More one-sided? Most of the big dailies in the USA are already solidly left,
editorially. Which way do you see the balance tipping?

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jawnb
[citation needed]

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jeffdavis
A citation is needed here but not for the original comment?

Peronally, I think this particular line of discussion is useless, with or
without a link to some partisan "study" from one side or the other.

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penguindev
The article raises a decent point, but yes the -40 is obviously misleading.
Why would anyone sell it for negative instead of just liquidate it? When NYT
bought the paper it essentially paid 1bil + 100mil-ish assumption of pensions.
Now when it sold it, it only got 70 mil.

It's better to correctly restate the purchase price, rather than make the
selling price negative. But that wouldn't generate click throughs.

Edit: This is related to the Enterprise Value concept of a company. You
include liabilities in this calculation when calculating a buyout valuation
(not sure if that includes pensions or not; I don't do stocks anymore now
because it's all just a giant federal reserve hedge fund)

Edit 2: wikipedia says EV should include unfunded pensions, which makes
rational sense.

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Maven911
This math is wrong. The pension obligations are liabilities and not an
immediate expense. Many companies have huge pension liabilities along with
monstrous amounts of debt. What you need to look at is the equity, in other
words assets - liabilities, and if that equity figure is more then 70 million,
then the purchaser got a discounted deal.

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spikels
No you are confusing the price (or market value) of a company and it's balance
sheet. For many reasons the price that a company sells for is almost never the
same as the shareholder's equity (i.e. equity = assets - liabilities). First
not all assets or liabilities are marked to market (i.e. regularly revalued)
generally because some are hard to accurately value (e.g. IP, brand, customer
relationships). Second neither assets nor liabilities consider the expected
future profits of the company. Third the value of something depends on the
buyer and seller as they many have different opinions. Forth the value of an
entire or large portion of a business is different than a small portion
(control premium). And these are only some of the most important reasons -
there are many more!

Just take a look at any publicly traded company. The market value of the
equity (i.e. market cap) almost never be the same as the shareholder's equity.
And if you wanted to buy the entire company you would almost certainly have to
pay more than market cap.

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Maven911
Sure, that I know that book values doesn't equal market values. But what was
being proposed was that the pension liability is an immediate expense that
should be added to the purchased price of the acquistion -- which is something
that does not make sense at all.

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MyDogHasFleas
"What's even more shocking is that the Globe has been doing great
journalism—winning Pulitzers, etc."

Wow! That buggy whip company is DOING GREAT! Some of their buggy whip makers
just got awards from the Buggy Whip Makers Guild for their high quality buggy
whips!

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duaneb
You're right, journalism is completely old fashioned and we can just do with
pundits and gossip.

...

Have you gone mad? The medium is irrelevant to the content.

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JumpCrisscross
I think the argument is that Pulitzers are a low-meaning metric for
journalistic quality today given that they're awarded by an (allegedly
irrelevant) subset of the media. I read the "buggy whip" part as humorous
garnishing.

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duaneb
Trust in journalism is inherently tied to brand: we trust the Globe (or the
Times or whatever) to do fact-checking for us. There is still no reason for me
to trust anyone on the internet with this regard: it could be karl rove in his
PJs for all I know. In this sense newspapers still hold immense value even
though they've lost most ways of commodifying it.

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6d0debc071
I wonder what they jettisoned in terms of other liabilities though.

