There Must Be Something About Mexican Billionaires Wanting To Become US Press Barons – Carlos Slim Now Has 6.4% of the NYT And Remember Mario Vasquez Rana’s Unhappy $40 Million Buy of UPI in 1986

Philip M. Stone September 17, 2008

Last Thursday when Mexican billionaire Carlos Slim announced he had amassed 6.4% of the New York Times A Shares (the ones without much voting power) the stock rocketed 9% with Slim’s 9.1 million shares worth some $139 million – already a paper profit of some $10 million before this week’s across-the-board losses. The big question, of course, is whether Slim figured the shares were underperforming and it was a good financial investment, or is he looking for something else, like influence?

The official word from his people is that this is just a financial investment. Since Slim made his billions in Mexican telecommunications (his Telmex is Latin America’s largest mobile phone company) maybe there will be some future synergy with the NYT on its mobile services, but otherwise he has no intention of getting involved in the running of the Times Company, his people say.

Not that his investment gives him any power to get involved – it’s the B shares owned mostly by the Ochs/Sulzberger family that has control of the Times Company and they’re not about to give any of that up (mind you, Slim has much more money than Rupert Murdoch so Slim for reasons other than just financial merit could easily “do a Murdoch” in the future and make an outlandish bid for the NYT similar to what Murdoch did with Dow Jones. Just how loud does money speak with Times family members  --  the Sulzberger/Ochs families must surely have seen over the past year how the Bancrofts have laughed all the way to the bank, real happy to have gotten out as they did, with newspaper valuations falling as much as they have since Murdoch made his $5 billion offer. 

And remember two hedge funds now also have a large piece of the A shares and they managed to get two members added to the NYT’s board, so no doubt the hedge funds and Slim will be comparing notes (Incidentally there has been a report that Slim already had a 3% NYT holding, and this new buy brings him up to more than 9% but there has been no confirmation).

It’s real difficult these days to find positive news about the newspaper business, yet here are two big hedge funds and a Mexican billionaire making very large investments in the basically powerless NYT A shares. Now these people obviously are not stupid, so what do they know that we don’t? Are they just willing to take a long-term view that things will get better and they’ll make out eventually like bandits, or is something else at play here? Even after the Slim announcement last week, Goldman Sachs still maintained its NYT “sell” recommendation. 

The Slim investment brings memories flooding back to 1986 when Mexican billionaire Mario Vazquez Rana bought United Press International (UPI) out of bankruptcy for $40 million. Vazquez Rana had made his fortune in the furniture business and then in 1976 he started his Organizacion Editorial Mexicana (OEM) which today is the largest Mexican print media company and the largest newspaper company in Latin America.

Even in those days his OEM was raking in the pesos so $40 million was just a drop in the petty cash, and yet surely this was an inexpensive opportunity for Rana to become a US household name -- a major media baron north of the Rio Grande River. But it turned out to be two of his most disappointing years. For one thing he discovered UPI “gringos” didn’t take to following orders as systematically as the way things worked in Mexico. For another, he didn’t speak English and this really did make communications difficult in a very true sense, whether in person or on the phone.  He took the UPI manager in Mexico City, a Dutchman, as his personal translator and everywhere Rana went to speak with staff or clients along went the translator in the mogul’s private jet. And that was another thing -- private jets were not part of the UPI mentality!

If one actually did speak Spanish that was a quick route to the top – in Dallas, where UPI’s technical center was located -- a low-level manager originally from Puerto Rico suddenly became one of Rana’s most trusted lieutenants – he was a smart guy but the key was speaking Spanish.

Vazquez Rana tried to do the right thing – he added staff members, increased overall spending and with Mexico hosting the 1986 World Cup he ensured that UPI was well represented with all the editorial staff and technical facilities necessary even though the original budget for the event was about non-existent. But Vazquez Rana had a real thing about trying to contain costs and that brought him in conflict time and time again with what he believed to be an intransigent Wire Service Guild representing UPI’s 800 US editorial staff. The Guild went strictly by the contract; not by what the new boss ordered.

And Vasquez Rana had contempt for the way he was treated. He saw himself as the UPI savior but staff, and many clients, did not. It was bad enough for the clients that EW Scripps had given UPI away in 1984 in a secret deal for $1  to a couple of unknowns who practiced the Baha’i faith, but it was really too much to come out bankruptcy by being Mexican-owned. There was great American media contempt for such foreign ownership; much to the US media’s shame they never gave him a chance. 

One memorable experience that sums up differing mentalities came when Vazquez Rana was addressing, via his translator, a meeting of senior UPI business executives. His lieutenant walked in the room, whispered something in his ear, gave Rana copies of some bills, and Vazquez Rana then went ballistic. Rising, his face beetroot in rage, he asked via the translator, “Do you know why I often compare UPI to a whorehouse?”  Well that certainly got everyone’s attention.  “Because of things like this,” he said, slamming down the bills. “I spent so much money ensuring that UPI would have the best coverage possible from the World Cup, and what do I get in return? $24,000 worth of personal phone calls home made by staff while they were in Mexico. I’m going to get every penny of that back,” he exclaimed, and there was no doubt in everyone’s minds that he would do just that.

Finally, with two years of about $1 million in monthly losses Vazquez-Rana figured it just wasn’t worth it anymore and he sold the right to operate UPI to an investment group associated with the Financial News Network, headed by  Dr. Earl W. Brian, who later went to prison for fraud, but that’s another story. UPI then turned up in Saudi hands, saw it wasn’t going to make a success emphasizing Middle East news, and they dumped it in the lap of Reverend Moon’s Unification Church.  Seeing what it is today, a really sad finale to a once greatly respected international news service. Who knows, if Vazquez Rana had been offered a fair chance by staff and clients alike what would UPI be today?

Slim should not forget the Vazquez Rana experience. If he tries to poke his fingers into the Times he’ll get a very rough welcome, and not just by staff.