Terms of the deal were not announced but the Washington Post Co. said it will retain the pension assets and liabilities and certain employee obligations.
Harman has said he will retain 250 of Newsweek’s 325 employees. It’s not clear what Harman will be paying although the New York Times, quoting one source, says he will pay $1 in exchange for absorbing Newsweek’s considerable financial liabilities.
“[Harman] has pledged not only to continue to produce a lively, compelling and first-rate news magazine, but also an equally dynamic Newsweek.com and he intends to keep a majority of Newsweeks very talented staff,” said Donald Graham, WaPo’s chairman and CEO, in a statement.
Washington Post Co. put Newsweek up for sale earlier this year, as the venerable magazine has been beset by losses. Newsweek has negative EBITDA and produced $56 million in operating losses in 2009 and an $11 million loss in first quarter. Bidders have included OpenGate Capital, Newsmax, hedge fund manager Thane Ritchie and Fred Drasner.
WaPo said any resulting gain or loss from the Newsweek sale won’t be material.
The Washington Post has turned away several prospective buyers because it didn’t like their editorial direction or feared deep staff cuts, the New York Times says.
Last week, WaPo reportedly had problems with Avenue Capital Group’s planned partnership with American Media, publisher of the National Enquirer. Avenue Capital wanted to use American Media to handle advertising and other back-office functions after buying Newsweek. Avenue Capital, up until this point, was the front runner but WaPo didn’t like its ties to the National Enquirer, according to press reports. Enter Harman.
“In seeking a buyer for Newsweek, we wanted someone who feels as strongly as we do about the importance of quality journalism. We found that person in Sidney Harman,” Graham said.
The 91-year old Harman is currently chairman emeritus of Harman International, which makes audio, video and navigation products for the auto, consumer and professional market. He founded the predecessor firm, Harman/ Kandon Inc., in 1952.
Allen & Co. advised WaPo while Guggenheim Securiites provided financial advice to Harman.
Harman could not be reached for comment. Avenue Capital declinded comment.