Saturday, February 03, 2007

Newspaper Industry News - New York Times

The Schulzberger family is pulling $100 million out of Morgan Stanley after a London- based managing director of Morgan Stanley Investment Management who has been trying to incite a shareholder revolt against Sulzberger. As a result, the New York Times family finances are now public.

"Morgan Stanley had been the longtime custodian of the family's assets, including its stake in the Times company - which, based on recent share prices, is worth close to $640 million.)" Hassan Elmasry, the Morgan Stanley director, is in charge of Morgan Stanley's American and Global Franchise Strategies Portfolio, an $11.5 billion investment fund that owns about 7.6 percent of the Times' nonvoting shares. He wants the family to company eliminate its dual shareholder structure, which he believes fails to provide adequate oversight of management.

He has a point. The stock is now down to $24, down 40 percent from two years ago. In addition, the New York Times has made some spectacular mistakes. (They bought the Boston Globe for $1.1 billion in 1993. They bought the Telegram & Gazette for $296.3 million in 2000.)
Recently Robinson announced an $814 million writedown on the Boston Globe and another New England paper - an accounting charge that highlighted a past financial misstep.
CNN Money goes on to note that "Elmasry's cause will be strengthened if he succeeds in lining up Bruce Sherman, the head of Boca Raton-based Private Capital Management. He is the largest owner of Times stock outside the family, with an 18.5 percent stake. Sherman also, of course, was the activist shareholder who forced the sale of newspaper chain Knight Ridder to McClatchy (Charts). He has had discussions with Elmasry but has not yet decided if he wants to jump into the fray.

Bloomberg News reports that the families (Sulzberger and Ochs) control the New York Times through Class B shares, which have a 1 percent economic interest in the company yet carry the right to elect nine of 13 board members. The Class A shares, owned by others including Morgan Stanley, elect the other four directors.

It's good to know that the New York Times is vulnerable.

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