NYT To Add Two Directors Proposed By Private Equity Funds

Philip M. Stone March 19, 2008

The New York Times Company has agreed to add two directors proposed by two private equity funds that now hold 19% of the company, but in reality nothing really changes – the Sulzberger/Ochs families still have complete control.

But the compromise to add two of the proposed slate of four directors announced by the equity funds means management can concentrate on managing the company rather than getting embroiled in a major proxy fight. For Harbinger Capital Partners and Firebrand Partners they at least will have two voices on a board of 15 – not nearly enough to swing decisions but at least they’ll know what is going on at board level and they can at board level propose various ideas on how to make the company more profitable.

Joining the board, if approved by shareholders which won’t be a problem, will be James Kohlberg and Firebrand founder Scott Galloway.

The private equity firms have said they do not dispute the dual share system that gives control to the Sulzberger/Ochs families (they’d love to dump it but there is no way they can), but they said they also wanted to see the company become far more active in digital businesses and get out of poorly producing investments. Two examples were to sell the compnay’s share of the Boston Red Sox baseball team and also to sell their new Manhattan headquarters building and then lease it back.

Last week NYT CEO Janet Robinson signaled that the company has got the message and said that everything can go on the table for sale except for the namesake newspaper, but at the same time she defended why the company held onto to the baseball team and the company didn’t see the benefit of a lease-back on its new building. But she emphasized how the company intended to concentrate on digital projects.

In reality, it can’t hurt the company to have new blood on the board which should be able to come up with new ideas. If the board (read: family) likes the ideas then nothing lost and if the board doesn’t like the ideas well it will be “Thanks, but no thanks.”

The investment by the private equity funds is of more than passing interest. The investments were made with the NYT shares down near historic lows so it won’t take too much of an uplift to make a profit. And it could well be the equity funds figure if the Times Company could really get into more and more digital businesses then the profits could really increase over a relatively short period of time.