Paper Tigers on Prowl

Newspaper conglomerates are hearing the footsteps.

In recent months, newspaper-driven companies, including the New York Times(NYT Quote), Tribune (TRB Quote) and Knight Ridder(KRI Quote), have all faced indignant investors.

Others, such as USA Today publisher Gannett(GCI Quote), Dallas media big wheel Belo(BLC Quote) and Wall Street Journal owner Dow Jones(DJ Quote), have been spared public discontent, though their shares continue to sulk.

Over two years, New York Times has lost almost half its value, while Gannett and Belo are off around 40% and Dow Jones is down 28%. With little clearing on the horizon, rumbles of discontent are likely to grow louder.

Gabelli & Co. SVP of Research Barry Lucas notes the "huge gulf" between companies like the Times and Dow Jones, where management is protected by a so-called dual-stock structure that puts voting control in the hands of minority shareholders, and companies like Tribune and Gannett that don't have such protections.

"With one class of stock, at least in theory, something could be done," Lucas says of Gannett. By contrast, at family-controlled Belo, "Company management might be responsive and courteous, but they still have voting preference," Lucas says.

New York Times Co. has come under attack from 5% shareholder Morgan Stanley Capital Management to eliminate the dual-stock structure. The company says it looks after its long-term interests.

At Tribune, now subject to internal strife stemming from a big leveraged-buyback plan, Lucas says the single-class stock gives the dissident Chandler family "a certain opportunity to have themselves heard. At least they can speak up." A Gabelli & Co. affiliate owns shares in the companies mentioned.

While the Tribune situation is in flux and change at the New York Times, Dow Jones and Belo Corp. seems unlikely given the nature of the family control, a call to arms paid off this spring for investors at Knight Ridder. Thanks largely to the perseverance of Private Capital Management's Bruce Sherman and partners, the company was put up for sale and eventually sold to McClatchy (MNI Quote) for $6.5 billion.