Morgan Stanley Raises Stake in New York Times Co. (NYT) to 7.62%
In an amended 13D filing on New York Times Co. (NYSE: NYT), Morgan Stanley disclosed a 7.62% stake (10.95 million shares) in the Company. This is up from the prior 9,541,084 share stake (6.62%) the firm disclosed in a past filing.
In the original 13D filing (04/18/06) Morgan Stanley noted they withheld their vote for management's slate of directors to be elected by the Class A Common Stock at the annual meeting held on April 18, 2006. The firm said the dual-class voting structure creates special privileges as well as responsibilities and said the Board and management failed to fulfill their responsibilities effectively. Morgan Stanley also commented on the consistent underperformance of the stock while management's compensation rose. Morgan Stanley wants the company to amend the capital structure in order to combine the Class A Common Stock and Class B Common Stock into a single class.
While clearly dissatisfied, Morgan Stanley originaly noted that they accumulated the position because they felt the stock was undervalued and represented an attractive investment opportunity.Since Morgan Stanley's original filing, shares of New York Times have drifted even lower.
From the Purpose of Transaction Section of the Original Filing:
From time to time, the Reporting Persons acquired shares inthe ordinary course of business for investment purposes and have held a continueto hold such shares in such capacity.
The Reporting Persons withheld their vote for Management'sslate of directors to be elected by the Class A Common Stock at the Issuer'sannual meeting held on April 18, 2006. The Issuer's current dual class commonstock structure effectively entitles the Issuer's Class B common stock, $0.10par value (the "Class B Common Stock"), to all of the shareholders' votingrights and to elect two-thirds of members of the Issuer's board of directors(the "Board").
The Reporting Persons believe that the dual-class votingstructure at the New York Times Company, which is an exception to the generalrule of one-share, one-vote, creates special privileges as well asresponsibilities. The Reporting Persons contend that the Board and management atthe New York Times Company have failed to fulfill these responsibilitieseffectively. While it may have at one time been designed to protect theeditorial independence and the integrity of the news franchise, the dual-classvoting structure now fosters a lack of accountability to all of the company'sshareholders.
Over the past several years, The New York Times Company hasconsistently underperformed its peers. Its market value has declined by 52%since its peak in June 2002. The share price has fallen by 29%, 38% and 33% inthe one, three and five year periods to the end of March 31, 2006. Despitesignificant underperformance, management's total compensation is substantial andhas increased considerably over this period. As a long-term, committedshareholder since 1996, the Reporting Persons have privately conveyed theirconcerns to the Issuer's Board and senior management on a number of occasionsand have suggested substantive strategies to operate the business better andmore efficiently allocate capital. However, to date, the Board and managementhave failed to take the actions necessary to improve operational and financialperformance.
The Reporting Persons are filing this statement on Schedule13D because they are dissatisfied with the lack of accountability of the Boardand management to the Issuer's public shareholders and the resultant lack of theprogress that the Issuer has made to enhance shareholder value. The ReportingPersons want the Board and controlling Class B shareholders to amend theIssuer's capital structure in order to combine the Class A Common Stock andClass B Common Stock into a single class of common stock with the same rights,preferences and other privileges. The Reporting Persons believe thatde-classifying the share structure of the New York Times Company will foster aculture of accountability that will ultimately benefit all shareholders,including Class B shareholders, by improving the financial and operationalperformance of the business and closing the gap between the market price of thestock and its intrinsic value.
The Reporting Persons purchased the Class A Common Stock basedon the Reporting Persons' belief that the Class A Common Stock at current marketprices are undervalued and represent an attractive investment opportunity.Depending upon overall market conditions, other investment opportunitiesavailable to the Reporting Persons, and the availability of Class A Common Stockat prices that would make the purchase of additional Class A Common Stock desirable, the Reporting Persons may endeavor to increasetheir position in the Issuer through, among other things, the purchase of ClassA Common Stock on the open market or in private transactions or otherwise, onsuch terms and at such times as the Reporting Persons may deem advisable.
The Reporting Persons intend to review their investment in theIssuer on a continuing basis and may engage in discussions with management andthe Board concerning the business, operations and future plans of the Issuer.Depending on various factors including, without limitation, the Issuer'sfinancial position and investment strategy, the price levels of the Class ACommon Stock, conditions in the securities markets and general economic andindustry conditions, the Reporting Persons may in the future take such actionswith respect to its investment in the Issuer as it deems appropriate including,without limitation, seeking Board representation, engaging financial, legal andother advisors, making proposals to the Issuer concerning changes to thecapitalization, ownership structure or operations of the Issuer, changes to theoverall strategic direction of the Issuer, merger and/or sale opportunities,communicating with other shareholders regarding the company, purchasingadditional Class A Common Stock, selling some or all of its Class A CommonStock, engaging in short selling of or any hedging or similar transaction withrespect to the Class A Common Stock or changing its intention with respect toany and all matters referred to in Item 4.
Except as set forth herein, no contract, arrangement,relationship or understanding (either oral or written) exists with the ReportingPersons as to the acquisition, disposition, voting or holding of shares. Exceptas set forth herein, the Reporting Person has no present plan or proposal thatwould result in or relate to any of the transactions required to be described inItem 4 of Schedule 13D.
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