Did Jeff Bezos Overpay For The Washington Post?

Jeff Bezos, the surprise new Washington Post owner, may have paid much more than market value for the newspaper.

In fact, the Amazon founder may have coughed up four times more than he needed to when he agreed to the Graham family’s $250 million asking price and become the sole owner.

According to Reuters, media companies are generally valued at 3.5 to 4.5 times EBITDA or earnings before interest, taxes, depreciation, and amortization. The Washington Post company’s newspaper division posted an EDITDA of $15 million in 2012 according to one financial analyst, making it worth about $60 million. Bottom line if these numbers are accurate: “Based on those estimates, Bezos paid about 17 times 2012 EBITDA.”

What’s more, Washington Post CEO Donald Graham said that Bezos didn’t even try to negotiate the asking price. “I named a price and Jeff agreed to pay it,” he said.

Other financial analysts suggest that a “trophy asset” like the Washington Post newspaper can’t be evaluated with traditional financial metrics.

Bezos, who has an estimated net worth of $25 billion, bought the paper as an individual, so Amazon itself is uninvolved.

Bezos noted that there will be some changes on the horizon for the Post. “We will need to invent, which means we will need to experiment. Our touchstone will be readers, understanding what they care about — government, local leaders, restaurant openings, scout troops, businesses, charities, governors, sports — and working backwards from there. I’m excited and optimistic about the opportunity for invention.”

Boston Red Sox owner John Henry agreed late last week to buy the Boston Globe for $70 million in cash from the New York Times. The Times originally paid $1.1 billion for the Globe and other media properties, which means it lost a staggering 93 percent on its original investment. According to some observers, the Boston Globe has lost so much value that the transaction is really about the real estate where the Globe sits, with the newspaper itself as a throw-in.

Three other groups claim they offered more than Henry but nonetheless lost out on the bidding.

Both Bezos and Henry have vowed not to interfere in the editorial process of their new acquisitions.

Given how much market share has been lost by legacy media outlets, do you think that a highly successful businessman such as Amazon’s Jeff Bezos otherwise made a bad deal when he bought the Washington Post?

[Image credit: Steve Jurvetson]