Even before restive shareholders began ramping up pressure on the New York Times Co. and insurance mogul Maurice R. "Hank" Greenberg started buying shares, Chairman Arthur O. Sulzberger Jr. was thinking about taking the company private.
In recent months, he has been quietly soliciting advice from trusted friend and financial adviser Steven Rattner, according to sources familiar with those discussions.
Rattner today runs Quadrangle Group, an investment firm he co-founded in 2000. But he and Sulzberger have been friends since the early 1980s, when both men were reporters in the Times' Washington bureau. Rattner's firm, which is active in private-equity deals, has been advising the Times for years.
Last spring, BusinessWeek has learned, Rattner met with members of the Ochs-Sulzberger family, who control the voting shares of the parent company through a trust and hold 9 of the company's 13 director seats.
He offered various strategic alternatives, say sources, including a leveraged buyout, for the company, which has a market cap of $3.3 billion, less than half its peak in 2002. Rattner and Sulzberger, who work out together in the mornings, continue to talk informally about the possibility of the Times' going private, say these same people.
Despite those talks, Sulzberger continues to defend, at least publicly, the current structure of the company, which has two classes of stock. The sources say Sulzberger never asked for a more formal private buyout plan from his old friend. Sulzberger declined to comment.
A buyout would offer all the usual enticements: a premium that some investment bankers estimate could be as much as 20 percent for shareholders, plus the opportunity to retreat from market scrutiny.
But make no mistake: Going private soon remains unlikely and would be no easy feat. Even though speculation about Greenberg's intentions provides good theater, any buyout would require approval from six of the eight trustees who control the bulk of the Class B voting shares.
And family members are not interested in giving up their regular dividend or the benefits of liquidity that a publicly traded company offers, sources say.
Riding out shareholder discontent
The dual stock structure has ensured family control and enabled the investment that allows the Times Co. to continue publishing what is widely regarded as the world's most influential media property.
Given this family control and its presumed mission of protecting the Times, it's relatively easy to imagine the Ochs-Sulzberger clan playing a game of shareholder rope-a-dope: buying time, perhaps, in the hopes the activists will find more pliant targets or the business climate will improve enough to boost the stock price. (Consider the fact that Carl C. Icahn is much less interested in breaking up Time Warner. now that the media giant's stock tops 20.)
Such control has insulated the Times Co. from the same kind of market pressures that tore apart newspaper company Knight-Ridder last year and is now forcing Tribune Co. to explore various sale scenarios.
Still, the Times faces increasingly withering scrutiny. Investors holding more than a quarter of its common shares withheld votes for directors at the annual meeting in April. At the same time, Morgan Stanley Investment Management, which owns 7.6 percent of the company's common shares, filed documents with the Securities & Exchange Commission requesting that the dual share structure, never popular with governance hawks, be put to a shareholder vote. The firm also wants the position of chairman and publisher, held by Sulzberger, to be separated. The Times Co. is especially vulnerable because its big-city newspapers are facing major threats from the Web. Since January, the publisher's shares are down 14 percent, to about 24.50. On Nov. 27, Citigroup analyst William Bird downgraded the stock to "sell."
The Times Co. is at a unique juncture in its long and storied history, but the ownership situation looks likely to rule out imminent action. One private-equity executive, of all people, points out that shareholders bought into the Times, which has been public since 1967, fully aware of its dual stock structure. And that few have squawked about a similar setup at Berkshire Hathaway.