Don Graham: Here’s Why My Family Just Sold The Washington Post, A Paper We’ve Owned For 80 Years; Bezos Outbid A Half-Dozen and was deemed the “highest and best”

Don Graham: Here’s Why My Family Just Sold The Washington Post, A Paper We’ve Owned For 80 Years

ALYSON SHONTELL AUG. 5, 2013, 5:22 PM 2,648 1

Don Graham, former owner of The Washington Post, wrote a letter to the paper’s employees about his family’s tough decision to sell the news property they’ve owned for 80 years. Here it is, below:

All,

I have a most surprising announcement. Our company is making it public right now that we have sold The Washington Post to Jeff Bezos, the founder of Amazon. To be clear, the buyer is not Amazon, but a company owned by Jeff personally. The price is $250 million and what we are selling includes the weekly papers called for shorthand The Gazettes and Robinson Terminal… This leaves me with two questions: why are we selling and why to Jeff? The first question is much the harder. All the Grahams in this room have been proud to know since we were very little that we were part of the family that owned The Washington Post. We have loved the paper, what it stood for, and those who produced it. But the point of our ownership has always been that it was supposed to be good for the Post. As the newspaper business continued to bring up questions to which we have no answers, Katharine and I began to ask ourselves if our small public company was still the best home for the newspaper. Our revenues had declined seven years in a row. We had innovated and to my critical eye our innovations had been quite successful in audience and in quality, but they hadn’t made up for the revenue decline. Our answer had to be cost cuts and we knew there was a limit to that. We were certain the paper would survive under our ownership, but we wanted it to do more than that. We wanted it to succeed.

Don The Washington Post’s Financials Suggest Bezos May Have Gotten Himself A Huge Bargain

JIM EDWARDS AUG. 5, 2013, 5:41 PM 2,266 5

Amazon CEO Jeff Bezos has yet to describe his plan for the Washington Post, which he just bought for $250 million. Even though the newspaper itself is part of an industry that’s in free fall, the finances of the Washington Post as a standalone paper actually have some bright spots.

He may have gotten a bargain.
Here’s what Bezos is getting for his $250 million, based on the company’s 2012 annual report.
First, the bad news.

Revenues are going down:

Overall revenues at the Post declined 7% to $581.7 million in 2012.

The paper lost $54 million in 2012, an increase loss from 2011 when it lost $21 million.

Print ad revenue particularly is in decline:

– 14% in 2012

– 11% in 2011

– 6% in 2010

And circulation is in decline:

– 2% in 2012

Print ad revenue is a particular problem:

Print ad revenue declined 14% to $228.2 million in 2012

But the online section of the Post is pretty healthy:

Online revenue (washingtonpost.com and Slate, mostly) increased 5% to $110.6 million

Display online advertising revenue increased 6% in 2012,

Online classified advertising revenue decreased 1% in 2012.

Bezos is not taking Slate.com, just the newspaper and its web sites. But still, he’s paying $250 million for a business that has $581.7 million in annual revenues, about one-fifth of which is a $100 million-internet business which is growing.

It won’t take too much more growth — or too many cuts — to make the Post profitable.
He’s paying a roughly .5X revenue multiple on the whole and a 2X revenue multiple on the web business.

If those numbers were coming out of a tech startup — where valuation multiples can go as high as 6X revenues —  Bezos would have gotten a huge bargain.

Jeff Bezos Outbid A Half-Dozen ‘Potential Suitors’ For The Washington Post

ALYSON SHONTELL AUG. 5, 2013, 5:13 PM 1,413 1

Reuters

Amazon CEO Jeff Bezos just spent $250 million in cash to acquire The Washington Post. This is not an Amazon purchase, it was bought by Bezos personally.

Bezos was not the only interested party, but he was deemed the “highest and best,” according to AllThingsD. Allen & Co, a firm hired to shop The Washington Post, tells the paper its representatives “spoke with a half-dozen potential suitors.” Bezos was selected by The Post Co.’s board.

The Graham family has owned The Washington Post for 80 years. Bezos doesn’t seem to have a plan for it. He says helping The Washington Post win in a digital journalism world will “require experimentation.”

Jeff Bezos Beat Other Bidders for the Washington Post

Published on August 5, 2013
by Peter Kafka

Jeff Bezos wasn’t the only one interested in buying the Washington Post. But he was “the best and highest bidder,” according to a person familiar with the transaction.

The Post’s parent company shocked much of the media business today by announcing that the Amazon CEO will buy its namesake paper for $250 million. The news follows a bidding process conducted by media bankers Allen & Co., which saw several buyers take a run at the paper.

But like many media companies, the Post is a public company that is run in many ways like a private business. And the Post would have been unwilling to sell it to “the wrong person,” my source said. It’s worth noting that Warren Buffett, who has been on a newspaper buying spree himself, already owned 23 percent of the Washington Post company. (Also worth noting: Earlier this year Bezos invested $5 million in Henry Blodget’s Business Insider.)

In a letter to employees, published on the Post’s Web site, Bezos announced that he won’t be “leading the Washington Post day-to-day.” But he also suggests that the man who used technology to permanently change the retail industry has big plans for one of America’s most storied newspapers. “There is no map, and charting a path ahead will not be easy. We will need to invent, which means we will need to experiment.”

A few other details that are not in the press release announcing the deal, but can be found in the accompanying SEC paperwork:

The Post is selling the paper and its name — meaning the Washington Post Company will have to be called something else. But it is not selling the real estate associated with the paper, which means that Bezos will be paying rent to the paper’s former owner.

Unlike other media companies,  the Post has an overfunded pension plan, not an underfunded one. But the Post will still be giving Bezos what amounts to $50 million to help pay off the costs of his new employee’s pension liabilities. Bezos will be responsible for current Post employee’s pensions, while the old company will be responsible for retired employees’ pension.