Knight Ridder may not be the best managed company, or a great place to work. But can another media company do a better job of leveraging its 29 newspapers? This is the assumption behind a challenge by two major shareholders, who want to get rid of 65-year-old Chairman Tony Ridder and either sell the company off to the highest bidder, or break it up.
Legg Mason’s Private Capital Management (PCM), which owns 19 percent of the company, complains in a letter to the board that Knight Ridder is underperforming, even compared to the rest of the newspaper industry. According to PCM, the company has failed to deal with “continuing consolidation among traditional sources of print advertising revenue; the redirection of advertising dollars to other media; its unexceptional operating margins; and its lack of a nationally read paper capable of being leveraged in the online market.” PCM’s complaint has been joined by Harris Associates, which owns 9 percent. Tony Ridder, meanwhile, holds just 1.9 percent.
The specter of a possible bidding war for Knight Ridder has caused the company’s battered stock to do a quick jump. But one assumes that PCM and Harris’ complaints are about more than just a short-term stock boost. The question is why PCM thinks that other newspaper companies would achieve better results.