Arguments for the Transaction
Bezos’ reputation as a great executive is not up for debate. However, the man is not regarded as a traditional turnaround artist. As the Post struggles with falling ad revenues and declining readership, it will certainly need a deft hand at the helm. If its buyer can rise to the challenge, the paper’s admittedly hefty price tag will seem quite reasonable in hindsight. In particular, the Post will need to work overtime to monetize and expand its digital offerings. It will also need to invest in a more robust and flexible news-gathering operation while continuing to burnish its signature political offerings. Given the slowly brightening outlook for digital media, these are not impossible hurdles.
Arguments Against
The best argument against this deal takes the form of a similar deal that the The New York Times Company (NYSE:NYT) closed shortly before Bezos’s announcement. With the $70 million sale of the Boston Globe to a Boston-based businessman who is widely regarded to have purchased the paper for sentimental reasons, NYT tacitly admitted that it had no further use for a “second-tier” regional daily newspaper. Although the The Washington Post Company (NYSE:WPO) functions as a primary arbiter of the American political conversation and has a much wider circulation than the Globe, it is not clear that it is worth three times as much as a paper that serves a large, wealthy metropolitan area like Boston. Many observers argue that Bezos overpaid for the Post by as much as 50 percent.
Where Do Bezos, the Washington Post and the Washington Post Company Go From Here?
For investors with exposure to the The Washington Post Company (NYSE:WPO), this could be a welcome development in the short term. Any post-transaction uncertainty will make the company look more attractive by comparison. As long as its test-prep and charter school operations continue to hum along, the firm will probably mirror the performance of the broader market.
The biggest question lies in the ultimate fate of the Washington Post. Although Bezos has not indicated that he intends to do so, it would not be unthinkable for him to pursue a “marriage” of sorts between Amazon.com, Inc. (NASDAQ:AMZN) and the paper. This might involve his own company’s Kindle device as well as the burgeoning publishing database that it continues to amass. A total takeover of the The Washington Post Company (NYSE:WPO) is also not outside the realm of possibility. Aggressive traders and investors may wish to preempt this move with hedged positions in the firm. Going forward, more cautious investors would do well to keep abreast of the situation as well.
Mike Thiessen has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Inc. (NASDAQ:AMZN). The Motley Fool owns shares of Amazon.com, Inc. (NASDAQ:AMZN).
Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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