Pressure on Publisher Intensifies
Knight Ridder Inc.’s largest shareholder Thursday applied more pressure to the San Jose newspaper chain to put itself up for sale, saying it might nominate candidates for the company’s board and raising the possibility that it would approach potential buyers.
Private Capital Management, which owns a 19% stake in the nation’s No. 2 newspaper chain, said in a regulatory filing that it was dissatisfied with what it described as Knight Ridder’s “limited response” to complaints from shareholders about the company’s anemic performance.
Private Capital Management touched off a revolt against Knight Ridder on Nov. 1, when it urged the firm to solicit buyers in an effort to boost its share price -- even saying it would be willing to support a hostile bid. Knight Ridder said it would respond “in due course,” prompting Thursday’s warning by the investment firm that it planned to hold talks with “third parties.”
Those parties presumably include potential bidders, said A.G. Edwards & Sons Inc. analyst Michael Kupinski. The Nov. 1 statement “was kind of more vague,” he said. “Now it’s: ‘We haven’t been dealt with and we might effect change ourselves.’ ”
Neither Knight Ridder nor Private Capital Management returned calls seeking comment.
Knight Ridder shares continued to rise on the saber rattling, gaining $1.29 to $63.32. The stock, which traded as high as $80 in 2004, closed at $53.38 the day before Private Capital Management made its initial overture.
Analysts and investors have pointed to the largest-circulation chain, Gannett Co., as a possible suitor for all or part of Knight Ridder, which owns 32 daily papers, including the San Jose Mercury News, Miami Herald and Philadelphia Inquirer.
Tribune Co., which owns the Los Angeles Times, and McClatchy Co., which owns the Sacramento Bee and Minneapolis Star Tribune, have also been mentioned as possible buyers. Tribune, McClatchy and Gannett declined to comment Thursday.
Private Capital Management said it planned to speak with more shareholders. It has already garnered support from the second- and third-largest shareholders, creating a potential voting bloc of 36% of the stock.
No. 3 shareholder Harris Associates has spoken with fellow investors, said Harris money manager Henry Berghoef.
“It’s a step in the same direction of trying to achieve fair value for the shareholders,” Berghoef said. He wouldn’t name any of the other parties to the talks.
Private Capital Management’s threat to field a slate of director candidates next year doesn’t portend a change in management control anytime soon. Knight Ridder directors serve staggered three-year terms, and only four of the 10 seats are up for election next spring, including the one held by Chief Executive Tony Ridder.
Still, analysts said the threat indicated that the investment firm was more serious about its effort than had been apparent.
Like others in the industry, Knight Ridder papers have been losing circulation at a rapid clip as readers shift to the Internet.
Private Capital has faulted Knight Ridder management for lackluster profit margins and for failing to compensate for the lack of a national newspaper, which it said could be more of a draw for readers and advertisers online.
