The Washington Post’s pension math

The Grahams didn't effectively pay to unload the paper

Felix Salmon, my sometime colleague, has a typically good post about the economics of producing journalism. Read the whole thing, as well as the first two installments of the trilogy.

But I’ve got to dispute this part about the value of the Washington Post’s sale to Jeff Bezos (emphasis mine):

… the Washington Post, just as much as the Boston Globe, was sold for less than the value of its pension obligations. Bezos might have paid $250 million for the paper, but he was also given $333 million to help him meet its pension obligations.

Make no mistake: this does mean that the Washington Post is worth substantially less than zero; you can’t just separate out the pension obligations and declare that somehow they don’t matter. What Bezos paid for the Post was not $250 million, it was negative $88 million.

To be sure, Bezos is $250 million out of pocket: the $333 million in the pension fund is ring-fenced for the Post’s pensioners.

It seems to me that zeroing out the pension obligations is exactly what Felix is doing here.

It’s true that the Grahams gave Bezos $333 million for pension purposes, but they also gave him $283 million or so in pension liabilities. You could credibly argue that the Washington Post actually sold for $50 million less than the $250 million sales price. But since those pension liabilities offset most of those pension assets, you can’t neglect to count the former against the latter.

In other words, the pensions are a part of the Post, but so is the money that funds them.

It’s not like the Grahams just gave Bezos and the pension fund an extra $50 million to be nice. The Post Company’s overall pensions are dramatically overfunded at 141 percent of obligations.

If anything, Bezos and the Post’s pensioners actually got a little hosed. Their pension is now overfunded at just 118 percent. And the Post Company actually hasn’t contributed to its pensions since 1991, when the newspaper was a much more dominant part of the company. It would seem that much of that surplus was generated by the newspaper, not Kaplan.

You could say the same thing about the Post’s headquarters building, which was built with newspaper profits and will be kept by the Post Company, which is looking to sell it and will probably get at least $75 million for it.

Of course, if you own a business you can slice it and dice it and sell off whatever you want.

But the pensions are a part of the Post, as are the investments that fund them.

One last thought: The Grahams didn’t exactly run an auction on this thing. They basically picked who they wanted to sell it to. So it’s quite possible that it would have fetched far more than $250 million if it had been an open process.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , ,