Knight Ridder’s largest shareholder on Thursday threatened to push its own slate of directors for the company’s board as it sought to increase pressure on the second-largest US newspaper chain to find a buyer.
In a filing with the Securities and Exchange Commission, Private Capital Management, a Florida-based investment firm owned by Legg Mason, said it was considering nominating directors at Knight Ridder’s 2006 annual meeting, as well as other governance options, “in light of the company’s limited response to the serious concerns” it had raised.
The filing marks an escalation in the showdown between Private Capital, which holds a 19 per cent stake, and the newspaper publisher’s senior management.
Last week the investment firm surprised the industry when it sent a letter to the Knight Ridder board, complaining about the company’s depressed share price, and urging them to move aggressively to arrange its sale. Two other large investors – Harris Associates and Southeastern Asset Management – offered their support.
Knight Ridder said it would respond in due course, although management has given no sign of its intentions, and Wall Street analysts and investors have puzzled over who would be interested in buying the company. Nonetheless, the speculation unleashed by Private Capital’s letter has lifted Knight Ridder shares more than 15 per cent in the past week.
The stand-off has focused attention on the struggles in the US newspaper industry. Earlier this week, the Newspaper Association of America, a trade group, reported that its members’ average daily circulation had fallen by 2.6 per cent during the past six-month period.
In its filing, Private Capital hinted at other, unspecified, action if Knight Ridder’s board did not comply with its demands.