September 17, 2019

Harman Family to Keep Its Stake in Newsweek

He had great hopes for Newsweek, which he bought last year after The Washington Post Company decided to cut its losses and sell, despite warnings from his financial advisers, lawyers and family members that it would prove to be an unwise investment.

Now Mr. Harman’s family is entrusted with honoring and preserving their patriarch’s legacy.

His former associates moved quickly on Wednesday to dispel concerns that his death would be disruptive to the young and fragile Newsweek/Daily Beast Company.

According to the company, Mr. Harman’s 50 percent share would remain in the hands of his trust, which has expressed no desire to sell. His trust will have the ability to appoint someone to represent Mr. Harman’s interests and fill his place on the Newsweek/Daily Beast board. Barry Diller, who is Mr. Harman’s partner in the joint venture, will assume Mr. Harman’s role as executive chairman of the company.

“Three weeks ago, when he told me of his illness, he said he and his family wanted to continue as partners in Newsweek/Beast in all events. We will carry on, though we will greatly miss his passionate enthusiasm and belief in the venture,” Mr. Diller said in a statement.

Mr. Harman’s lawyer, Robert Barnett, reiterated that the Harman family was behind Newsweek.

“The Harman family is totally committed to Newsweek and its future,” he said. “They will continue to be active and supportive as Sidney would have wished and in Sidney’s memory.”

Mr. Barnett said that decisions about who would take on responsibility at Newsweek/Daily Beast would come in time. “There will be a time for proper announcements,” he said. “Today is not that day.”

Mr. Harman had already signaled an heir apparent: his 29-year-old son Daniel, who is a student at Columbia Business School. Daniel had visited the Newsweek offices with his father and was one of a few family members who had accompanied Mr. Harman when he met with the magazine’s staff shortly after the sale.

“Sidney would say that Daniel could be a big asset,” said one person who spoke with Mr. Harman about his son’s possible role in the company. The person spoke anonymously because the conversation was supposed to remain private. “All of us took that to mean that he was the person that was most likely to be involved from the family.”

Mr. Harman, who died Tuesday night at 92 of complications from acute myeloid leukemia, was a stabilizing force for the troubled Newsweek. He had said privately that he would give Newsweek three years to succeed and could afford to lose about $40 million without there being a material impact on what he could leave his heirs. But now that those heirs control his stake in the magazine, it remains to be seen how that commitment will be honored.

The merger with Mr. Diller’s Daily Beast left Mr. Harman sharing control of the company. Mr. Harman did not have editorial control of Newsweek, which belongs to Tina Brown, the editor. One of Mr. Diller’s top executives, Stephen Colvin, became chief executive of the combined Newsweek/Daily Beast Company. Mr. Harman’s passing would seem to further place control of the company in the hands of Mr. Diller and his deputies.

Because they have played crucial roles in running Newsweek since the merger closed in February, Mr. Diller and his associates are likely to help smooth out what could have been a very bumpy transition had Mr. Harman been running Newsweek on his own.

“If the merger with the Daily Beast had not taken place, the magazine would be in crisis now,” said Jonathan Alter, a longtime Newsweek writer who is leaving the magazine. Mr. Alter said that Mr. Harman, Mr. Diller and Ms. Brown had worked together on their plans for reinventing the struggling newsweekly and that those plans would continue moving forward. “Because that merger was implemented, nothing will change except all the other things that have been changing.”

Newsweek has had some disappointments and some bright spots as it tries to remake itself. The number of ad pages it sold in the first quarter fell 31 percent compared with the same three months last year, though the first redesigned issue under Ms. Brown’s leadership did not have its debut until March 14, when the quarter was nearly over.

Over all, ad pages have increased since the current leadership took over. But this week’s issue — with just six pages of ads — was especially thin.

Family stewardship of a publication is always a tricky thing once a patriarch or matriarch passes away. Stability is certainly possible, as demonstrated by New York magazine, which remains in the hands of the Wasserstein family a year and a half after Bruce Wasserstein’s death.

But there are cautionary tales. The Bancroft family, which owned Dow Jones and The Wall Street Journal, sold the paper to Rupert Murdoch in 2007. After the head of the family, Jessie Bancroft Cox, died in 1982, no Bancroft rose to assume her role.

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DealBook: Level 3 to Buy Global Crossing in $3 Billion Deal

Level 3 Communications announced on Monday that it would buy Global Crossing in a transaction worth $3 billion.

The deal values Global Crossing at $23.04 a share — about 56 percent above the telecommunication company’s closing price on Friday. As part of the acquisition, Level 3 will also assume $1.1 billion of debt.

The deal would combine the two companies’ fiber-optic networks over three continents, offering data and voice connections to more than 70 countries.

The combined entity will create a company with revenue of $6.26 billion and earnings of $1.57 billion, after taking into account projected cost savings.

“This is a transformational combination that we believe will deliver significant value to the investors, customers and employees of both Level 3 and Global Crossing,” James Q. Crowe, chief executive of Level 3, said in a statement. “The complementary fit between the two companies’ networks, service portfolios and customers is compelling.”

Level 3 shares rose 12 percent in premarket trading. Global Crossing was up 59 percent.

Level 3 already has significant shareholder support. Singapore Technologies Telemedia, Global Crossing’s largest investor with a stake of about 60 percent, has agreed to vote in favor of the acquisition. Once the deal closes, ST Telemedia is to nominate directors to the board, relative to the size of its stake.

“This strategic combination is an important milestone for both Global Crossing and Level 3, and a value-creating proposition for all stakeholders,” Lee Theng Kiat, chief executive officer of Singapore Technologies Telemedia, said in a statement. “Going forward, we believe the combined strengths of the two companies will position it in a very favorable, competitive position to expand in the U.S. and compete globally.”

Singapore Technologies Telemedia bought the stake in Global Crossing out of bankruptcy in 2003. Once a high-flying network operator, Global Crossing stumbled in the aftermath of the dot-com bust, filing for chapter 11 in early 2002.

Level 3’s advisers included Bank of America Merrill Lynch, Citigroup and Morgan Stanley; Rothschild provided the fairness opinion; and Willkie Farr Gallagher was the legal adviser. Goldman Sachs advised Global Crossing, while Latham Watkins served as the company’s legal adviser. Singapore Technologies Telemedia worked with Credit Suisse Securities.

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DealBook: Daimler and Rolls Royce Make Formal Offer for Tognum

Daimler and Rolls Royce made their joint offer for the engine maker Tognum official on Wednesday, leaving their bid unchanged from the initial proposal of 24 euros a share.

The deal values Tognum at 3.2 billion euros ($4.6 billion). Tognum shareholders have until May 18 to tender their shares.

Tognum management has suggested that shareholders who accept the offer will retain the right to a 50 euro cent dividend for 2010 if the deal is approved at the shareholder meeting on May 11. That would effectively make the bid worth 24.50 euros a share.

Daimler already owns 28.4 percent of Tognum, which was trading at about 18.50 euros a share before speculation about a bid began circulating before Daimler’s announcement on March 9, which means the offer represents nearly a 30 percent premium.

At midmorning on Wednesday, the company’s shares were trading at 25.54 euros. With the stock trading higher than the deal price, it could suggest that investors think the buyers will sweeten their offer.

“Twenty-four euros is our offer, and we’re sticking to it,” Florian Martens, a spokesman for Daimler, said in an interview.

Daimler’s existing stake in Tognum gives it a blocking minority, meaning that under German law it can reject any major strategic moves at the company, including the acceptance of a competing bid.

The joint bid becomes effective if 50 percent plus one of all Tognum shares are tendered. Tognum, which makes engines used in ships and power generation, among other things, is about 45 percent-owned by institutional investors. ING holds more than 5 percent, while First Eagle Management and BlackRock each own more than 3 percent.

Top management and members of the supervisory board at Tognum own about 5 percent of the company, according to a recent presentation. While they have welcomed the offer, they have not yet issued a recommendation on it.

Once that 50 percent level is reached, the buyers can begin integrating the marine division of Rolls Royce with Tognum, and undertake other parts of their strategic plan, which includes a billion euros in capital expenditures and research and development over three years.

Daimler and Rolls Royce plan to keep the company’s current dividend policy in place until they gain control of 75 percent of the company, after which they will maintain a “conservative balance sheet,” according to an agreement the companies signed with Tognum.

Daimler has been the owner of Tognum before. In 2005, it sold the company, then known as MTU Friedrichshafen, to the Swedish private equity firm EQT for 1.6 billion euros. EQT then took it public in 2007 at 24 euros a share, the same price being offered now.

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