Washington Post makes a wacky deal
Why is it buying a supplier of combustion processes to utilities? Investors are scratching their heads.
The owner of the namesake newspaper and the for-profit Kaplan education business on Friday agreed to acquire Forney Corp., a supplier of systems that control and monitor combustion processes in electric utility and industrial applications, from United Technologies (UTX). WaPo CEO Donald Graham tried real hard to show how Forney relates to the rest of the company's "decentralized operating philosophy," but he has left many investors scratching their heads.
"Our acquisition of Forney Corporation is part of the Post Company's ongoing strategy of investing in companies with demonstrated earnings potential and strong management teams attracted to our long-term investment horizon," he said in a press release.
That could be said about practically any company, no?
Some media reports have argued Washington Post is trying to emulate the strategy of Warren Buffett, a longtime shareholder, member of the board and personal friend of the Graham family. There's one critical difference. Buffett's investment horizon is "forever," and investors aren't going to be nearly as patient with Washington Post.
Graham himself is downplaying the Oracle of Omaha connection, though he did acknowledge to The Wall Street Journal that Buffett's influence might have "rubbed off" on him. Indeed, the diversification path isn't exactly new. Last year, Washington Post acquired a majority stake in Celtic Healthcare, a provider of hospice and home health care services. Like the Forney deal, Celtic was a small purchase.
Washington Post has struggled for a while. During the last quarter, its Kaplan business and its newspaper publishing divisions both lost money. If Graham hopes to be like Buffett, he's going to need to write a lot more checks.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
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