NEW YORK (Reuters) - New York Times Co. NYT.N investors should not expect the Sulzberger family to change the way it runs the company despite pressure to scrap its dual-class share structure, a close adviser to the publisher said on Wednesday.
“There’s no possibility of it changing,” Quadrangle Group managing principal Steven Rattner told the Reuters Hedge Funds and Private Equity Summit. “I don’t think this is a situation where you’re going to find some surprise ending to the story.”
Rattner’s comments came amid speculation that private equity buyers are circling the struggling company under pressure from a big shareholder to shake up the media group.
Rattner, a longtime adviser to the paper, said the dual structure does not prohibit an investor from taking a stake in the company, but added that the company has no interest in going private.
“The Times has been clear about their interest in going private. It doesn’t appear to be particularly attractive,” he said, adding such a deal would only create a new set of problems.
Two influential proxy advisory firms have recommended Times’ shareholders withhold their votes from a slate of board directors at an April 24 annual meeting.
The Ochs-Sulzberger family, led by company Chairman and Publisher Arthur Sulzberger Jr., is the main holder of New York Times Class B shares, allowing them to choose 9 of 13 directors. Class A shareholders elect the rest of the board.
Institutional Shareholder Services and Glass Lewis & Co. have criticized the Times’ structure as contributing to poor performance and demanded a separation of the roles of chairman and publisher.
Their recommendation bolsters the view of several significant shareholders, including Morgan Stanley money manager Hassan Elmasry, who have taken the company to task over governance practices and a falling share price.
Times stock has fallen 4.9 percent in the past year, and by more than 30 percent in the past two years.
While the newspaper industry grapples with a migration of readers to the Internet and declining advertising, the Times may have to come up with better answers to ease shareholder concerns, said Rattner, a former Times journalist and a friend of Sulzberger.
“There have to be other solutions beyond simply saying to shareholders, you know, ‘tough luck,’ and I think everybody at the Times agrees with that,” he said.
At the same time, shareholders know when they buy into media companies such as the Times or Washington Post Co. WPO.N that the families that run them have more say.
“If you buy the shares knowing all this and you’re unhappy, your right is to leave,” he said. “It was never part of the deal that they would have the right to change the governance structure.”
Other newspaper companies, including Knight Ridder Inc., and Tribune Co. TRB.N, have pursued a sale of the company or conducted major overhauls in response to shareholder concerns.
That, in turn, has led journalists and media experts to worry about the future of the U.S. news business.
“I do think it’s an important thing to have in a free country,” Rattner said. “But I do think that the business model of the typical newspaper in America and probably globally is very questionable at the moment.”
Family control is seen as one way to let the Times deliver the news with staff and budgets that it deems appropriate, regardless of Wall Street pressure to cut costs.
“I do think (the Times) is a very, very important institution that needs to be preserved and protected,” Rattner said.
Chicago real estate magnate Sam Zell beat out two Los Angeles billionaires in a deal earlier this month to take media company Tribune Co. TRB.N private, saddling it with $8.4 billion of new debt. The deal includes an employee ownership plan, financed by company contributions to an employee stock option plan and debt.
“The Tribune deal is a very clever deal,” Rattner said. “They’ve made the government their partner through tax advantages via the ESOP (employee stock ownership plan). There is significant risk in the equity. Whether it’s a prudent investment is still to be seen,” Rattner added, saying that he did have concerns about employees giving up part of their pension plans to invest in the company.
An ESOP is an employee benefit plan that makes the employees of a company the owners of stock in that company.
Additional reporting by Michael Flaherty
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