So far, so good. Private Capital Management’s pressure on Knight Ridder has rapidly pushed the newspaper group’s shares up 20 per cent and forced the board to “explore strategic alternatives”. The move makes sense for Private Capital. It has continued building a stake in Knight Ridder even as the shares have headed south. But the operating outlook for newspapers in general remains tough. Costs are rising and revenues remain challenged as advertising shifts online and circulations slowly decline. With few obvious catalysts for a re-rating, Private Capital has resorted to wielding its 19 per cent stake to force change.

One hope is that a rival newspaper bidder buys Knight Ridder, in the hope of squeezing out cost synergies and in the belief that the sector has been oversold. But doubling up on newspapers now would be a brave. The other is that private equity companies - with cash burning a hole in their pockets and cheap financing still available - pay up. Warner Music, after all, looked even more challenged when it was snapped up and still generated a hefty return for its private equity backers.

However, it is one thing to force the board into action. It is another to seal a deal. First, the board could yet opt to gear the business up rather than sell it. Second, it might be a struggle to achieve a historic take-out multiple - which could value the business well above $70 a share, compared with $63 today - given the increased industry risks. Investors might already have enjoyed a large chunk of the premium they can expect.

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