There's an interesting article in the Breaking Views section of today's Wall Street Journal which suggests that The New York Times Company (NYT) has a breakup value far exceeding its current enterprise value.
Here's a summary:
--NYT owns a skyscraper in midtown Manhattan which is worth around $1 billion.
--Its About.com could fetch at least $600 million according to analysts.
--Its Boston Globe property (which includes the Globe as well as a part of the Red Sox), is probably valued at $550 million - half the $1.1 billion NYT paid for it, but at Jack Welch's offer for it last year.
--NYT's 15 smaller regional newspapers offer attractive cashflows and can be valued at $700 million, based on comps to GCI and MNI
1,000+600+550+700 = $2.85 billion. Then offset capital gains from asset sales with the loss from selling the Globe and subtract the after tax total from the company's current enterprise value ($3.5 billion) and you're left with a valuation of $700 million for the trophy New York Times newspaper and web site.
After adjusting for the sale/leaseback of its headquarters, wrote the Journal, "the newspaper unit's operating income should be $200 million a year, suggesting an enterprise value multiple of just 3.5 times these earnings. For perspective, consider that Rupert Murdoch's News Corp. is paying more than 20 times expected operating income to acquire The Wall Street Journal's publisher."
The article warned that NYT is a controlled company and may turn out to be dead money, even if it's undervalued. I suppose the bull case is that by buying first class assets at a discount to their value, it's hard to lose money in the long run (especially with NYT's yield of 5%), and that the company's true value will eventually be realized.
Disclosure: No position