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Purchase of Globe carries risk

The marriage of The New York Times and The Boston Globe began with a phone call last fall from Arthur Ochs Sulzberger, a descendant of a man who stabilized an ailing newspaper in New York, to William O. Taylor, a descendant of a man who kept one afloat in Boston.

In a way, both men said Friday, it was their similarities and the similar traditions of the newspapers they have run for much of their adult lives that brought them _ and their companies _ together.

"We go back a long way," Sulzberger said, seated next to Taylor in a hotel suite in New York. "My father and Bill's father. My grandfather and Bill's grandfather."

On the day after the announcement of the biggest American newspaper merger ever, there was talk among Sulzbergers and Taylors, on Wall Street, in newsrooms across the country, and on the streets of Boston and New York, about times changing. "It's been a hell of a run and it'll be a hell of a run," Taylor said.

But, of course, the point of the day was to declare that the "run" will be a different one from now on, with the Times' parent company becoming an even bigger public company.

And the Globe, freestanding for 121 years, will become, like a lot of other newspapers, a subsidiary of a big company from somewhere else.

In all of the places where the $1.1-billion deal was being studied, questions were raised that went to the heart of the modern newspaper business: Will the industry's once-high profit margins return? Does conglomerate ownership of news-gathering businesses hurt the news? Is the newspaper business still the future?

Again and again, in meetings with securities analysts and in news conferences in Boston and New York, Taylor and Sulzberger and their executives worked to convince the skeptics.

Why, Times executives were asked again and again, would the company make such a huge investment in a newspaper market so much like New York or, for that matter, in a newspaper at all?

"It is a true diversification," the president of The Times Co., Lance R. Primis, answered. The economies of Boston and New York, he said, are different. The Globe, which is much more dominant in Boston than the Times in New York, is, as a strong regional newspaper, a different type of newspaper than the company has owned before, he said.

And, Primis said, there are possibilities for joint distribution, advertising sales and new newspaper ventures, like efforts to use the massive data they collect in new commercial ways.

For the moment, the stock market did not appear convinced. Class A shares of The Times Co. fell $2.50 to close at $24.37{ on the American Stock Exchange. Declines in the stock prices of acquiring companies are common immediately after a merger is announced.

Shares of Affiliated Publications Inc., the parent of The Globe, rose 37{ cents each, to $13.625, on the New York Stock Exchange.

Securities analysts who follow media companies were divided about the wisdom of the deal for Affiliated, with some declaring it a bargain for The Times Co. and some saying that the price was too high.

In addition to the Globe, Affiliated owns a one-third interest in BPI Communications, a magazine publishing company; BPI's managers and a venture capital firm own the other two-thirds.

In the middle ground on The Times Co.'s deal were analysts like John Morton of Lynch, Jones & Ryan, who said he thought Times Co. shares declined because the company had paid a "fat" price.

He said that according to his estimates, The Times Co.'s merger with Affiliated would dilute the Times' earnings by 10 to 15 cents a share. Before the announcement of the merger, some analysts had predicted per share earnings for The Times Co. of 85 to 90 cents a share.

But Morton said he thought the deal was basically a good one in financial terms, because the Globe's operation is well run and newspapers are still a good business.

"Long range," Morton said, "there aren't newspapers like this for sale _ and won't be _ because newspapers like this are already owned."

The Times Co.'s first important diversification move came in 1971, when it acquired Cowles Communications Inc. for shares valued at roughly $70-million. The Cowles merger brought Family Circle magazine; a Memphis television station, WREG-TV, and three Florida daily newspapers, the Ledger in Lakeland, the Gainesville Sun and the Ocala Star-Banner.

The Cowles move set the direction for further diversification by The Times Co., building on that foundation in three key businesses _ magazines, broadcasting and regional newspapers, mainly in the Southeast _ until now.

Today, in addition to The Times, the company publishes 31 regional newspapers. Analysts agree that the company has done an excellent job lifting quality and profits at most of the papers it has acquired.