Biggest Knight Ridder shareholder urges company to sell itself
SAN FRANCISCO – Knight Ridder Inc.’s largest shareholder wants the nation’s second-biggest newspaper publisher to seek a buyer, contending there are few other options left for a company that has been rapidly losing favor with investors as more advertising shifts to the Internet.Private Capital Management LP, which owns a 19 percent stake in Knight Ridder, made the demand Tuesday in a letter addressed to the company’s board.”In light of limited revenue growth across the newspaper industry and the difficulties the company has faced in realizing fair value…for its shareholders, we believe the board should now pursue the competitive sale of the company,” wrote Bruce Sherman, PCM’s chief executive officer.If Knight Ridder doesn’t put the company on the sales block, PCM will consider supporting “more aggressive efforts” that might include an ouster of the company’s management, Sherman wrote.San Jose-based Knight Ridder did not immediately return calls seeking comment on Tuesday. A message left after business hours at Naples, Fla.-based PCM also wasn’t returned.With 32 daily newspapers Knight Ridder ranks as the nation’s No. 2 newspaper publisher by circulation. Its papers include The Miami Herald, the San Jose Mercury News and The Philadelphia Inquirer.PCM’s letter reflects its frustration with a steep slide in Knight Ridder’s stock. The shares have steadily declined from a 52-week high of $71.01 last November, trading at $52.42 less than two weeks ago – a 25 percent decline that wiped out $1.7 billion in stockholder wealth.PCM, a subsidiary of Legg Mason Inc., has lost about $100 million on its $840 million investment in 12.8 million Knight Ridder shares – a stake accumulated over the past 5 1/2 years.Investors embraced the prospect of a sale. Knight Ridder’s shares surged $4.62, or 8.7 percent, to close Tuesday at $58 on the New York Stock Exchange.Tuesday’s demand apparently didn’t come out of the blue.Responding to an invitation from Knight Ridder CEO Tony Ridder, Sherman shared his concerns with the company’s board during a July 19 meeting.After that meeting, Knight Ridder attempted to lift its sagging stock by raising its quarterly dividend, buying back shares and announcing plans to trim its staff in Philadelphia. The company also sold the Detroit Free Press and the Tallahassee Democrat in Florida – deals that generated a $207.9 million windfall during the third quarter.None of those moves, though, resuscitated Knight Ridder’s shares.The continued erosion convinced PCM Knight Ridder won’t be able to adapt to a media market that is increasingly being driven by the Internet. In his letter, Sherman also cited the company’s “unexceptional” profit margins and a “lack of a nationally read paper capable of being leveraged in the online market.”PCM’s letter didn’t identify what it would consider to be a fair price for Knight Ridder, but asserted that the company’s own board already has determined the newspapers’ break-up value exceed their current market value.Knight Ridder has long been considered a prime takeover target, largely because it doesn’t have a special class of family-controlled stock that can be used to deter unsolicited acquisition bids.Formed in 1985, PCM owns significant stakes in several other major newspaper publishers, including The New York Times Co., Gannett Co., Media General Inc., and McClatchy Co.