Legg's PCM wants Knight Ridder sale

BUSINESS DIGEST

Business Digest

November 02, 2005|By KNIGHT RIDDER/TRIBUNE

PHILADELPHIA -- A private investor group with a 19 percent stake in Knight Ridder Inc., the nation's second-largest newspaper chain, called yesterday for the sale of all or parts of the company to boost its sagging market value.

Private Capital Management Inc., of Naples, Fla., owned by Legg Mason Inc., of Baltimore, said in documents filed with the Securities and Exchange Commission that it has asked Knight Ridder's board to "promptly pursue a competitive sale of the company."

It threatened less friendly approaches if it is unhappy with Knight Ridder's response.

"In the absence of such action," PCM said, it would "strongly consider supporting more aggressive efforts that might be initiated by other parties seeking to change the composition of the board, install new management, acquire a majority of the company's voting shares, or take other action to maximize shareholder value."

Pounded by difficult times in the newspaper business, shares of Knight Ridder, which owns The Philadelphia Inquirer and The Miami Herald among its newspapers, have lost 18 percent of their value since Nov. 9 last year, when they reached $71.07.

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 has lost about $100 million on its $840 million investment in 12.8 million Knight Ridder shares.

On the news of PCM's filing, Knight Ridder shares gained $4.62, or more than 8 percent, closing at $58 in heavy trading on the New York Stock Exchange.

The PCM filing included a letter from its chief executive, Bruce S. Sherman, to Knight Ridder's board of directors in San Jose, Calif., saying shareholders would be best served by the board soliciting competitive bids for the company. The letter did not name any potential buyer.

Sherman and other PCM officials declined to comment on the letter, and Knight Ridder spokesman Polk Laffoon IV said the company had no immediate comment.

PCM began boosting its ownership stake in Knight Ridder last month, after meeting with the newspaper company's board in July. It is now Knight Ridder's biggest shareholder.

Since the July meeting, Knight Ridder's board has repurchased 5 million shares and authorized the repurchase of 5 million more. It also sold and swapped a number of its newspapers, including a deal that sent the Detroit Free Press to Gannett Co. Inc., the nation's largest newspaper company. Last month, two of Knight Ridder's biggest papers, the Inquirer and San Jose Mercury News, announced buyout programs to reduce staffing.

Knight Ridder and other newspaper companies remain profitable. In the third quarter, Knight Ridder reported operating income of $96.3 million, down from $126.5 million for the corresponding quarter last year. Revenue in the quarter grew to $723.8 million from $708 million.

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