Washington Post makes a wacky deal

Why is it buying a supplier of combustion processes to utilities? Investors are scratching their heads.

By Jonathan Berr Jul 22, 2013 8:01AM
Product shot from Forney Corp. (© Forney Corp)Whenever a company makes an acquisition, it tries to convince Wall Street that the deal will help it expand its existing business. That's not the case with a deal Washington Post Co. (WPO) just made.

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.

 More on moneyNOW
Tags: Investing
Jul 22, 2013 10:35AM
I am pretty sure I was taught not to do this in business school.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?


[BRIEFING.COM] The stock market finished an upbeat week on a mixed note. The S&P 500 shed less than a point, ending the week higher by 1.3%, while the Dow Jones Industrial Average (+0.1%) cemented a 1.7% advance for the week. High-beta names underperformed, which weighed on the Nasdaq Composite (-0.3%) and the Russell 2000 (-1.3%).

Equity indices displayed strength in the early going with the S&P 500 tagging the 2,019 level during the opening 30 minutes of the action. However, ... More