The New York Times Co. nyt has approved a $250 million investment by Mexican telecommunications billionaire Carlos Slim Helu, a deal that could make him one of the largest shareholders of the Times Co.
The $250 million investment by tycoon Slim complements his telecommunications holdings in Latin America, and gives Slim, reputed to be the world's second-richest man, the prestige of owning one of the world's best-known and most influential newspapers.
"By having a stake in the New York Times, he's basically projecting himself as a powerbroker in this country, regardless of how his investment does," said Armand Peschard-Sverdrup, a senior associate of the Center For Strategic and International Studies, a Washington think tank.
Slim also stands to make a sweet profit off his investment — the Times will pay him 14% interest along with warrants he can use to boost his stake in the company from 6.9% to 17%.
The Times announced late Monday the financing agreement with Slim's companies Banco Inbursa and Inmobiliaria Carso for $125 million each. Times President Janet Robinson said the cash infusion will be used to refinance existing debt and will provide the company with increased financial flexibility.
"The New York Times needs money in the next few months, and Slim has it," said Shannon O'Neil, a Latin American expert at the Council on Foreign Relations in New York.
In September, Slim and members of his family purchased $128 million worth of the company's publicly traded shares — an investment the Times said has since fallen to $58 million.
This time, he's locking in his profits — the Times said Slim would buy six-year notes in the company with warrants that are convertible to common shares. The Times will pay 11% of the interest on the notes in cash and 3% in additional bonds, the newspaper reported.
This kind of guaranteed return is similar to the 10% annual dividends insisted upon by financier Warren Buffett when he invested billions in Goldman Sachs Group gs and General Electric ge.
Slim gets no representation on the Times' board, and no special voting rights. But when he exercises the warrants, he would own up to 17% of the company's common stock, making him one of the company's largest shareholders. The Ochs-Sulzberger family owns about 19% of the company but controls it through a special class of supervoting shares.
"I don't see him meddling," said George Grayson, a Mexico expert at the College of William & Mary in Virginia. "Those of us who read the New York Times everyday, I think will be uncorking champagne bottles because unless these papers are infused with capital they are going to cut back services."
Slim is part of a crop of emerging-market billionaires, from Mexico to Russia, who are on a shopping spree now that the recession has slashed the prices of some of America's best-known companies, and other sources of credit have dried up.
Slim recently upped his stakes in Saks Fifth Avenue, and his Inbursa brokerage in Mexico bought at least $150 million of Citigroup's sinking shares.
"A lot of foreign business tycoons are bargain shopping, and this is something the U.S. has no choice but to get used to," Peschard-Sverdrup said. "We're going to have all these various foreign interests owning various U.S. assets. It's one of the things that the recession ultimately has accelerated."