Posted by: Jon Fine on April 10, 2007
I generally find Alan Mutter’s Reflections of a Newsosaur quite perceptive, which is why I’m scratching my head over his most recent post about how the way out for the New York Times is to go private:
The family may have no choice about taking the company private, owing to the escalating pressure from dissatisfied public shareholders to abandon the two-tier stock structure that gives the clan effective control over a company whose operating profits of 16.3% in the last 12 months seriously trail the industry average of 23.5% (see graph below).
Um . . . actually, no. They don’t have to do anything. The Times’ Class B shares, which essentially control the company, are held by a family trust. Said trust is set up, in the wording of a company public filing, “to maintain the editorial independence and integrity of the New York Times and to continue it as an independent newspaper, entirely fearless, free of ulterior influence, and unselfishly devoted to the public welfare.”
Said trust is controlled by eight trustees, all of whom are family members, including Times Co. chairman (and New York Times Publisher) Arthur Ochs Sulzberger Jr. Changing the trust is not easy. It requires the vote of six trustees.
And all this, as Morgan Stanley portfolio manager Hassan Elmasry has discovered, is a pretty effective means of insulating the company from being forced to act in accordance with the vicissitudes of the stock market.
The Times doesn’t need to go private, even if they’ve certainly thought about it.
I’ll have more to say about the Times Co. and its current situation later this week.