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HR: Buying A Newspaper
By Harun Rashid

25/6/2001 10:59 pm Mon

[Rencana ini sedikit terlambat diterbitkan di KM2 kerana EGM MCA sudah pun selesai dan Ling telah mendapat hasratnya itu. Tetapi dia sebenarnya mendapat Nanyang yang sudah koyak rabak kerana semua penulis dan editornya yang hebat-hebat sudahpun tiada lagi. Nanyang sudah tidak seunggul dulu lagi dalam waktu yang sebegitu singkat sekali. Sekaligus harga belian tidak berbaloi kerana semua permata di dalamnya sudah tiada lagi dan itu semua sukar dicari ganti - tambah lagi kerana mereka perlu menulis dengan tangan yang terikat nanti.

MCA sekarang sudahpun berbelah dan berbahagi hanya kerana ingin membeli satu akhbar yang sudah tidak berisi. Lihatlah nasib akhbar milik Umno yang sudah tenat sekarang ini - apakah MCA tidak takut Nanyang nanti memufliskan MCA sendiri? Baru beberapa hari ia sudah muflis karyawan yang bertahun-tahun menulis dengan penuh dedikasi. Mereka sanggup hilang kerja kerana tidak sanggup bersekongkol untuk menjajah minda anak bangsa sendiri - tidak seperti wartawan melayu yang tiada maruah dan harga diri. Akibatnya orang melayu menjadi me-layu sampai kini walaupun tuhan menghadiahkan banyak isu yang mahal-mahal selama ini. Apakah kaum Cina juga akan menjadi me-layu nanti? Itu semua terletak di hujung jari..... tapi kali ini tiada upah ataupun gaji namun ia lebih mulia dari segala-galanya sebelum ini. - Editor]

Buying A Newspaper

by Harun Rashid

Jun 23, 2001

First we were told it was simply a business transaction. Then it became a strategic political maneuver. Either way, it is a dead cat.

First let us examine the purchase as a business transaction. There are readers, or at lest there were readers. And there are advertisers, or at least there were advertisers. The readers and the advertisers pay money to the business. The total sales should be enough to cover the salaries of the employees and the cost of the newsprint. There should also be some money left to pay the rent and utilities.

The newspaper is a public corporation. Sometimes the shareholders get a dividend, and sometimes they do not. This a risk businessmen take. In the present purchase there was a lot of cash in the till, increasing a valuation based on net tangible assets. A buyer would expect to get this fat cash hoard. But he might not.

Buying a business with your last cent is risky, because there should be some capital left to operate the business. Buying a business entirely with borrowed money is less risky, unless you plan to pay it back. If you don't, that is a problem for the lender. Lending money to buy a newspaper has its risks. Lending ALL the money to buy a newspaper carries a lot more risk. Having a federal agency at hand willing to assume a rotten loan removes this risk.

The Malaysian people do not know what happens to their money. It is kept from them as an official secret. And when on the rare occasion they find out, they only stay mad for a few days. And the thieves get to keep the money, no thanks to the party-in-power and the prime minister, who has castrated the police and the Anti-Corruption Agency. Don't ask the finance minister. He has turned in his croupier and gone jet-setting. But that is tangential.

A business that is making a profit, and is expected to continue making around the same profit, can be evaluated on the basis of its earnings. In this case the newspaper is earning around RM 4 million per annum. Risk-free bonds will return over 5% with no management required, so a reasonable expectation would be a return of 10-12% on the invested capital. The present earnings represent a 10% return on RM 40 million, so that is a fair starting price to offer. If you hold out for a better return, then the price would be less.

The price paid (or nearly paid, so it seems) is said to be RM 230 million, and this is for only about 73% of the shares. If all the shares were bought, the total price would be around RM 310 million. This amount of money is spent to buy a newspaper that is returning RM 4 million annually. The rate of return is in the neighborhood of 1.3%. A return that low is not an attractive business deal, and anyone who tries to tell you it is has been too long at his cup.

The interest on the bank loan will be at least RM 15 million per year, with no payment on the principal. You may well wonder where this is to come from. At this point the simple business transaction requires additional capital input of at least RM 10 million per year, and perhaps twice or thrice that.

The man who sold the newspaper is laughing so loud he can be heard from Hong Kong to Kuala Lumpur. He not only has the cash from the sale, he has paid out the retained funds (about RM 45 million) in the form of a special dividend, 73% of which he is the direct beneficiary. The new buyer, disappointed and out-witted, stands staring out the window, wondering what happened.

No one can say what the lender is thinking, but it is easy to guess. As collateral for the loan the lender has taken The Star newspaper, along with the new newspaper shares. Since it is unlikely that the buyer will be able to pay the interest, much less the principal, the lender has an excellent chance to get the bundle for a song.

As a business transaction, the purchase is excellent for the seller and the lender. For the buyer ... well, he must be using someone else's money. Every buyer is happy twice, once when he buys and once when he sells. In between it often is pure misery. In this case there is perhaps more misery than average.

But now we are told it is a strategically important political decision. The justification is to be political. That means the buyer is a politician, and he has something in mind of a strategic political nature. It is worthwhile looking to see what that might be. Relieved of any necessity to make financial sense of the purchase, we may turn our attention to what he now confesses to be his real motivation. It is possible he wishes to educate the editorial staff to the admirable principles of his party. But no, he has sent them all packing.

Perhaps he wishes to persuade the writers to prepare favorable stories for the readers. But no, he has not discussed this option with them, and being suspicious of his future interference into their creative freedom, they have all quit. Never mind. New editors and writers can be brought over from The Star. They are seasoned and supple there.

We are left only with consideration of the readers. Will the readers understand the subtle maneuverings behind the purchase, now revealed to be a strategic political move? For many the answer is a clear No! These readers have bolted, rejecting the idea out of hand. Along with them have gone the advertisers, protesting against what is seen as tampering with the typesetters. Whatever has happened to the docile Chinese?

If the editors can't edit, the writers won't write, and the readers won't read, it is difficult to understand how the shrewd political ploy is to work. And if the advertisers remove their support the price is probably going to be a lot more than presently contemplated. This is because the readers and advertisers of The Star are also alienated by this masterful political chicanery.

The members of the political party are being called together in one room tomorrow to give their approval, both for the purchase and for the loan. It is not clear whether their approval is sought on the basis of the business transaction or the strategic political maneuver. This is an option of their leader, Ling, a man with long and wide experience in the handling of Chinese money.

The raucous outcry over the purchase is completely unexpected, says one seasoned political veteran. "I gave it the green light," he says. "We bought a Malay paper a few years ago, and the Malays never said a word." The Chinese, it seems, have been stirred, somewhat as a nest of hornets might be stirred, by public characterizations as "terrorists and Communists." They have been denounced as unpatriotic for defending their school properties, and ungrateful for demanding an accounting of public donations intended for relief of Chinese pig farmers. Fondling the favorite newspaper is the final affront.

The backroom talk is: "As punishment for voting against the incumbent in Lunas, this newspaper is being appropriated. In the next election you will get it from both barrels, the left'll be English buckshot, and the right'll be Chinese ideographs. We're going to show who rightly owns this country. Either support us or get back to China. We mean to rattle and shake the phantoms until we scare the tea down your pants. Next time you'll know who to vote for. Now get in here and approve this purchase! Give us your vote now and there will be something in it for you ... a seat, an office, or maybe a Datuk! You go against us and we'll remember you."

The seller, approached to buy the newspaper back, offered to pay only RM 100 million. Pressed for an explanation, he said, "Look, I sold you a going concern. Now what is it? My editorial staff is sacked, the writers have quit, the readers are boycotting the paper, and the advertisers are alienated and withdrawing their support. You have destroyed my newspaper, and now you want me to buy it back. You should be glad I'm willing to give you RM 100 million."

The leaders of the party are seriously divided over the entire issue, and there is to be a bloodbath later, no matter how the newspaper purchase goes. For the members, if they support the purchase they are buying a dead cat at a ridiculously high price, one they cannot afford. To do this they are putting their prize possession, The Star, at risk. The purchase is to require large sums of money for years into the future. All this for what? Will the readers ever return? Will the advertisers revolt against sister newspaper, The Star, also? Will the new newspaper bring back the Chinese vote, as planned? Will a vote of approval mean the bankruptcy of the MCA?

Yet if they vote to kill the transaction, there will be a personal price to pay. The leader, Ling, will be rebuked, and probably he and all his friends will eventually be forced from the MCA. The party itself will lose further face with the Chinese community and Malaysians in general. The ministers who oppose the purchase have been told their fate is sealed. They must succeed to survive. They appear to have the Chinese community behind them. The BN cannot survive without the Chinese vote. For the party-in-power it is a desperate and serious situation. It will be an interesting meeting.

Link Reference : Harun Rashid Worldview: Buying A Newspaper