Tag: James A. Kohlberg

Sidestepping a potentially nasty proxy fight, the New York Times Company announced yesterday that it would give two seats on its board to a pair of hedge funds seeking to increase investor profits.

Harbinger Capital Partners and Firebrand Partners have spent more than $500 million since December to buy a 19-percent stake in the family-controlled company, becoming the Times’ largest public shareholder. The funds had originally proposed four nominees to the board, saying they wanted to push the Times to unload holdings outside of its core business, such as a stake in the Boston Red Sox, and to invest more aggressively in its Internet operations.

Offering an unexpected compromise, Times Chairman Arthur Sulzberger Jr. agreed yesterday to expand the board from 13 to 15, and to seat two of the hedge funds’ nominees – Firebrand founder Scott Galloway and James Kohlberg, chairman of private equity company Kohlberg & Co. In exchange, the funds agreed to end to their proxy fight.
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The agreement marks the first time since the Times Company was taken public in 1967 that it has accepted directors nominated by outsiders, according to Times Company executives

What, if anything, seating dissident investors means for the Times remained unclear. A two-class stock structure gives the Sulzberger family control of a majority of the board, and the Harbinger-Firebrand group has said that it has no plan to challenge that control.

Galloway, a professor at NYU’s Stern School of Business who owns a Long Island estate complete with outdoor showers and a volleyball court with bleachers, made his fortune in the late 1990s by founding and flipping gift-site RedEnvelope.

A profile in Conde Nast Portfolio, entitled “Boardroom Braveheart,” described how he teams up with capital investors such as Harbinger, who ”provide the financial muscle, while he does the tire-kicking, letter-writing, and shareholder-swaying.” Galloway reportedly gets about 10 percent of the profits from the deal, in addition to the board seat if it’s successful, but assumes little financial risk.

The profile also quoted a graduate student in his class at NYU. describing his brash style. “He’s a jackass,” the student said. ”He’s not afraid to call you out if he thinks you don’t know what you’re talking about. But it works.”

Like most newspaper companies, the Times has been socked by circulation declines and the migration of advertising to the Internet. The company’s assets include About.com, the International Herald Tribune, the Boston Globe, a string of smaller newspapers, majority ownership of a new high-rise headquarters building in Manhattan, and the minority stake in the Boston Red Sox.

The Times has fended off activist investors in the past, including an attempt last year by Morgan Stanley Investment Management to eliminate the dual-tiered share structure, but they owned a smaller percentage of shares.

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• Zell takes over Tribune – December 21, 2007
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