PCM, Which Pushed for Knight Ridder Sale, Dumps Much of Its Stake in Newspapers

By: Private Capital Management, an investment company that had agitated for the sale of Knight Ridder Inc., has slashed its holdings of other newspaper publishers, according to a regulatory filing made Tuesday.

Private Capital has sold off its stakes in two newspaper companies, industry leader Gannett Co. and Richmond, Va.-based Media General Inc. , and cut its share in McClatchy Co. by more than half.

Sacramento, Calif.-based McClatchy wound up buying Knight Ridder last year after the head of Private Capital, Bruce Sherman, pressured Knight Ridder to take action to boost its long-lagging share price.

Private Capital had made a large bet on newspaper publishers, but those stocks have been declining in recent years as advertising dollars continue to migrate to the Internet.

A representative of Private Capital, which is based in Naples, Fla., did not return phone calls seeking comment.

Private Capital also slashed its stake in The New York Times Co. from 7.6 million shares as of June 30 to 2.6 million shares as of Sept. 30, according to the filing made Tuesday with the Securities and Exchange Commission.

The investment manager cut its stake in Lee Enterprises Inc. , a publishing company based in Davenport, Iowa, from 2.7 million shares to 955,563 shares. Private Capital's holdings of McClatchy went down from 8 million shares to 3.1 million shares.

The sale of Knight Ridder last year proved to be a watershed event for the U.S. newspaper industry. Tribune Co. , the No. 2 publisher by circulation, also faced pressure from restless shareholders and wound up accepting an $8.2 billion offer this April to go private in a deal orchestrated by the real estate magnate Sam Zell.

Last month another activist investor abandoned a two-year effort to press for changes at The New York Times Co. Hassan Elmasry, a fund manager at Morgan Stanley Investment Management, sold off his entire 7.2 percent stake after failing to get the Times to revise its two-class shareholder system, which gives the Sulzberger family the ability to maintain control.

Neither the Knight Ridder nor Tribune had dual-class share structures. Other newspaper publishers also have family control, including The Washington Post Co. and McClatchy Co.