Bloomberg News

El Pais Publisher Leans on Slim to Take Aim at Latin America

March 09, 2012

A man reads a copy of the Spain's El Pais newspaper, published by Promotora de Informaciones SA, in Madrid. Photographer: Denis Doyle/Bloomberg

A man reads a copy of the Spain's El Pais newspaper, published by Promotora de Informaciones SA, in Madrid. Photographer: Denis Doyle/Bloomberg

After losing almost 80 percent of its value in two years, one share of Promotora de Informaciones SA costs less than a copy of El Pais, the best-selling Spanish newspaper published by the Polanco family-controlled company.

The stock was trading at about 75 euro cents ($1) when Carlos Slim, the world’s richest man, bought a 3.2 percent stake in November. After the investment boosted confidence among the Madrid-based company’s lenders over a 2.9 billion-euro refinancing agreement, Prisa is now set to use Slim’s cachet in Latin America to expand in the region.

“El Pais has such strength in Latin America that is difficult to measure because it’s an absolute reference and needs to be valued,” Chairman Ignacio de Polanco, 57, whose late father Jesus de Polanco built Prisa around El Pais, the daily that spearheaded Spain’s democratic transition after the death of Francisco Franco in 1975, said in Madrid this week. “We’ll do it little by little.”

As newspapers grapple with the loss of readers and advertisers, patrons like Slim, who also owns a stake in New York Times (NYT) Co., may buy them time to innovate. The same month Prisa announced Slim’s investment, billionaire Warren Buffett, who in 2009 said that newspapers have the “potential for unending losses,” agreed to pay about $150 million to acquire his hometown newspaper’s publisher, the Omaha World-Herald Co.

Prisa rose 3.7 percent to 71 euro cents in Madrid, valuing the company at 704.3 million euros. The Madrid Stock Exchange General Index (MADX) fell 0.4 percent.

‘Room to Maneuver’

“What newspapers need is room to maneuver,” said Jack Griffin, a former chief executive officer of Time Inc. magazine, now a senior adviser at AlixPartners LLP in New York. “If you’re a wealthy person without stockholders or answering to a board, you can buy a paper for cash. You’re not worried about interest coverage or debt covenants, and you can focus on the business rather than the financial structure.”

El Pais, whose weekday editions sell for 1.20 euros in Spain, has seen its circulation dip 1 percent to 365,000 copies last year, according to statistics compiled by the Madrid-based OJD circulation office. That compared with 11 percent decreases at El Mundo and ABC, the two closest rivals, each costing 1.30 euros. El Pais’s figures were helped by sales outside Spain, where circulation jumped 28 percent to 55,000, according to OJD.

Next quarter, El Pais will go on sale in Peru, said communications director Pedro Zuazua. The daily, whose masthead reads “The global newspaper in Spanish,” is also distributed through partnerships with local dailies in countries including Chile, Mexico, Argentina and the Dominican Republic.

London Olympics

A smaller audience for newspapers globally has meant shrinking ad revenue. In 2012, a year full of advertising windfalls including the summer Olympics in London, European soccer championships and U.S. presidential elections, newspaper ad sales will shrink 1 percent, according to New York-based researcher MagnaGlobal, a unit of Interpublic Group of Cos.

In Spain, the toll will be greater. Newspaper ad revenue will probably slump 12 percent to 851 million euros, after falling by a similar magnitude in 2011 to pre-1993 levels, without taking inflation into account, said Eduardo Madinaveitia, a director for media research at Zenith Media in Madrid.

“Prisa has great growth potential in Latin America thanks to El Pais, but to tap that growth it needs more of an American strategy,” said Luis Jimenez, a partner at Deloitte LLP in Madrid. “People in Latin America don’t really want a local paper from El Pais, but they want to know what Spain thinks of a particular country in the region, something like the BBC.”

Shares Slump

Slim hasn’t made money from his investment yet. Since announcing the linkup with the billionaire, Prisa had fallen 8.7 percent through yesterday. Last week, the company reported a 451 million-euro net loss because of provisions for investments in Portugal and tax risks.

Besides El Pais, Prisa also publishes business newspaper Cinco Dias, magazines, and owns television and radio stations as well as the Santillana education division.

A spokeswoman for Inmobiliaria Carso SA, Slim’s investment arm in Mexico City, said his investments in El Pais’s publisher and The New York Times are exclusively financial investments.

Slim’s America Movil (AMXL) SAB is Latin America’s biggest pay-TV provider, with more than 13 million cable and satellite subscribers, mostly in Brazil. The company has also started video services over the Internet in Argentina and Uruguay.

Profitable Media

Other billionaires have taken on a more hands-on approach.

When Alexander Lebedev, a Russian ex-KGB officer who made a fortune with holdings from banks, airplanes to property, acquired the London Evening Standard in 2009, he said he’d use the British tabloid to help fight corruption. Lebedev added the Independent newspaper a year later. He paid 1 pound ($1.60) each for the titles.

He made the Evening Standard free in October 2009 and introduced digital editions of the papers to increase circulation. The Evening Standard’s circulation almost tripled in the three years through January 2012, according to the U.K. Audit Bureau of Circulation. While the Independent’s print circulation has declined since Lebedev purchased it, online readers are up 40 percent.

“I buy to make sure we have independent media and freedom of speech, this goes for Novaya Gazeta, ‘I’ and Independent,” Lebedev said in an interview in January. “I am trying to compensate for the emerging impossibility to sustain profitable media in the market because the market is going against the media.”

Murdoch Titles

The U.K. phone-hacking scandal around Rupert Murdoch’s newspaper empire may provide opportunities for buyers interested in British newspapers.

Murdoch, chairman and CEO of News Corp. (NWSA), shut the News of the World Sunday tabloid in July after his reporters were found having hacked into voice-mails for stories. Last month, he started a Sunday edition of the Sun newspaper.

News Corp.’s Times and Sun titles in the U.K. will probably be sold within two years as Murdoch extracts himself from Britain, and wealthy individuals would be among potential suitors, Panmure Gordon analyst Alex DeGroote predicted.

Newspaper ownership comes with prestige in the U.K. and executives are frequently rewarded with honors. Marjorie Scardino, the CEO of Pearson Plc (PSON), which publishes the Financial Times, was made a dame in 2002. Ian Gibson, chairman of Trinity Mirror Plc (TNI), was knighted in 1999.

“If you’ve got a big ego and a big checkbook, then British newspapers allow you to play at being influential,” said Charlie Beckett, director of media at the London School of Economics. “They’re more influential in many ways because they’re in English and they have a tradition of being opinionated.”

To contact the reporters on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net; Amy Thomson in London at athomson6@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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