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Monday, November 14, 2005

Maybe Private Capital Management should be sold (KRI)

The latest on the saga of Knight-Ridder v. Private Capital Management. KRI succumbs to the pressure and is reportedly seeking a sale. With Goldman Sachs no less. Great, go to market with the Refco/NYSE firm. Not like Goldman doesn't have a few of their own problems at the moment.
Although, the question that I asked earlier and I have to ask again: Who are these Private Capital Management people to throw stones at KRI? The article states that they have significant holdings in other newspaper stocks. Nice going guys. And why would KRI shareholders want to have representatives from your firm on their board? It's not like you've nailed the industry with your stock picks lately... And now you're agitating for a sale at a point in time where everyone is bearish on the newspaper industry?
Don't you understand the concept of selling into a hot market? Selling a newspaper now is like selling GM now -- who exactly is your buyer? Here is a copy of PCM's letter to KRI's Board of Directors. It states that they think there is a financial buyer who is willing to pay "fair value". Let me clue you in, PCM. Financial buyers never pay fair value. These guys are the smartest in the business (most of the time) and their whole raison d'etre is about paying less than fair value. So, that eliminates 50% of your potential buyer population right there.
Let's examine the other 50%: other newspaper companies. You might have an out there. But if I'm a competing newspaper company and I know that close to 40% of a competitor's shareholders are forcing a sale on my competitor, do you think I'm going bid up? Oh, and throw in the fact that almost everyone in the industry is facing circulation revisions, margin pressures and stock price pressures as well. Think they're going to be in a buying mood for the #2 player? Actually, they probably will be. Executives love to grow regardless of whether it's a good idea or not. So maybe KRI does have an out here.

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