May 12, 2009 11:26 pm

‘Grey Lady’ has a patient suitor

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At first glance, David Geffen, who recently tried to buy a stake in the New York Times, is not an obvious owner for the revered newspaper.

The billionaire is better known for his interests on the west coast of the US. A big donor to Los Angeles-based arts institutions, he has homes in Malibu and Beverly Hills, while his best friends are fellow Hollywood power players Steven Spielberg and Jeffrey Katzenberg.

But Mr Geffen has emerged as a potential buyer of the paper dubbed “The Grey Lady”. He was recently rebuffed after offering to buy the 19.8 per cent stake in the NYT held by Harbinger Capital Partners, the activist US hedge fund controlled by Philip Falcone. The offer was made at market value – well below the $500m Harbinger paid for the stake.

However, Mr Geffen, whose liberal political views dovetail nicely with those of the NYT’s editorial board, has a longer term goal in mind: outright control of a title many believe to be the most important in the US.

He has told friends that he will not pursue a hostile bid. However, he was keen to use the Harbinger stake as a beachhead towards eventually assuming full control, with people familiar with the situation describing him as a “patient buyer” of the paper.

The Ochs-Sulzberger family, which controls the New York Times through super-voting shares, would be wise to treat his interest seriously. Speculation is rife that some family members are looking to sell the paper, having been stung by the recent axing of its dividend.

Mr Geffen, meanwhile, recently retired from the film industry and is looking for a new challenge – and the New York Times might be just the ticket.

With a fortune estimated at more than $4bn, he can certainly afford to buy the company, which has slumped in value and now has a market capitalisation of less than $1bn compared with more than $4bn two years ago.

The cost of the paper also compares favourably with the Los Angeles Times, which piqued Mr Geffen’s interest in 2007 when it was put up for sale.

He made a $2bn cash offer for the title which was rejected by Tribune Company, the paper’s then owner, in favour of a rival, highly-leveraged bid led by Sam Zell, the Chicago property tycoon. Tribune Company has since been placed in Chapter 11 bankruptcy protection.

Mr Geffen’s spending power may have taken a knock in the recent recession but he remains one of the wealthiest – and most politically influential – figures in the US. The star-studded events he and Mr Katzenberg arranged for Barack Obama raised millions of dollars for the then presidential candidate’s fledgling campaign and boosted Mr Obama’s standing among other deep-pocketed Hollywood donors.

Mr Geffen also has an unrivalled collection of modern art and three years ago sold a Jackson Pollock painting for a record $140m.

Like many other Hollywood moguls he started his career in the mail room at the William Morris talent agency. The hours were long and the pay terrible, but he has always appreciated what he learned there, calling it “the Harvard School of Show Business – only better: no grades, no exams, a small stipend, and great placement opportunities”.

It was after leaving William Morris and entering the music industry that his career really took off. After starting Asylum Records in the 1970s, he promised his artists creative freedom, signing acts such as the Eagles and Joni Mitchell. He then formed Geffen Records, which scored hit after hit with bands including Aerosmith and Guns N’Roses.

The sale of Geffen Records to MCA, the film and music group, saw him join the ranks of the super-rich. He sold the company in an all-paper deal but earned more than $700m when MCA was later bought by Matsushita.

In 1994, he co-founded the DreamWorks SKG movie studio alongside Mr Katzenberg, and Mr Spielberg, with each man investing $33m. The initial investment paid off: the DreamWorks studio and film library was eventually acquired by Paramount for $1.6bn, with Paramount going on to sell the film library for $900m.

He is not the only billionaire eyeing the New York Times; Carlos Slim has already bought a stake in the company.

However, people familiar with the situation say Mr Geffen wants to buy the paper to allow it to continue investing in journalism.

He is undeterred by the structural challenges facing newspapers, such as the migration of advertising revenues to the internet, says one person familiar with Mr Geffen’s thinking. “He believes it is the most important newspaper in the US – and it needs protecting.”

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