Pressure Building on NYTCO From Morgan Stanley; Wall Street Sees Sale as Unlikely


Morgan Stanley Investment Management is ratcheting up the pressure on the Sulzberger family to boost the New York Times Co.’s flagging stock price. The Wall Street firm, which owns 7 percent of the NYTCO stock, wants shareholders to vote on a proposal at next year’s annual meeting to dismantle the dual-class stock system that keeps the Ochs-Sulzberger family in control — and to separate the job of company chairman and publisher of the New York Times, according to the WSJ and AP. Both positions are currently held by Arthur Sulzberger Jr. In April, Morgan Stanley’s Hassan Elmasry withheld his support for the company’s board of directors to protest NYTCO’s corporate governance. Times spokeswoman Catherine Mathis told the WSJ that the structure can’t be changed without approval of six of the eight family members in the trust and they have given no indication that they want to do it. About the only way NYTCO can make Elmasry and others like him happy is a big buyout offer but analysts say that’s unlikely, according to the AP.
WSJ: Elmasry argues that the Times system is unfair because the owners of the nonvoting shares, which he says represent more than 99 percent of the company’s economic interest, “elect only four of the thirteen directors” while the owners of the voting shares, which he says represent less than 1 percent of the company’s equity interests, elect nine directors. (Dual class structures are not unique to the NYTCOIf his proposal wins a shareholder vote, it would be only a symbolic victory — but one that he thinks would give the board ammunition in a negotiation with the family, according to a person “familiar with his thinking,” and prompt a change in management. What may be a different source said, “‘We know that the company’s relative underperform is tied to the current management,’ citing events such as the $450 million purchase of and the estimated $495 million to $533 million the company is spending on the construction of a new headquarters.”
AP:Morgan Stanely analyst Lisa Monaco (who operates seperately from Elmasry) just downgraded the stock because of weak revenue trends and the likelihood that the newspaper publisher would not be sold. She expected the company’s stock to underperform other newspaper publishers, which is saying quite a bit. “New York Times’s numbers, particularly at The Boston Globe, are likely to continue to lag its peers, given the company’s larger market exposure, dependency on movie studio advertising, and the impact of the 2005 Federated/May merger,” Monaco wrote in a client note. She also said it was “implausible” to expect a sale of the company since the Ochs-Sulzberger family doesn’t want to sell. Her views were backed up by UBS analyst Brian Shipman, who also expects the company’s ownership structure to be maintained.

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