Hedge Funds Raise The Ante At New York Times Company, Now Hold Near 10% Of Shares

Philip Stone February 13, 2008

When they announced in late January that they owned 4.9% of the New York Times Company, Harbinger Capital Partners and Firebrand Partners recommended a slate of four independent directors they wanted elected to the board of the New York Times Company. The basic answer then from Arthur Sulzberger was “We like our board, but we’ll take a look” – in other words “thanks, but no thanks”. Two weeks later and the equity funds have raised the ante.

They now say they own 9.96% of the company, they still want their proposed directors on the board and if they have  to go through their  own proxy solicitation then they will bill that cost  – it could add up to several million dollars depending on how contentious everything gets --  back to the New York Times Company.  If their slate wins then at least they’ll have four board directors who would approve such a cost – still a minority to the nine board members the family elects --  but not exactly a good omen as the company continues cost-cutting.  

The equity funds may not have been overjoyed to learn this week that two of Times’ independent directors are retiring this year and the company has recommended two others for their places, neither of whom are on the slate proposed by the equity funds. Red flag to the bulls?

One meeting has taken place between Times’ executives and the equity groups, but neither side has  given details. The equity funds say they are not trying to dislodge the two-tier share system that guarantees the Sulzberger-Ochs family ownership of the Times, (they would like to but can’t)  but they do want to be able to influence board decisions to gain increased shareholder value and they have been clear by that they mean by selling some assets and investing more in digital products.

The next step may be up to the Times’ board nominating and governance committee. It decides which nominees should be recommended to shareholders at the April 22 annual meeting; if the hedge funds see no joy with its nominated slate, then the fun could really start.