Hedge Funds Take On the Times

Two hedge funds have stepped up a campaign at the New York Times Co. likely to lead to a proxy fight, reports the New York Times.

Harbinger Capital Partners and Firebrand Partners LLC have amassed a 15.6-percent stake in the New York-based publisher, up from an increase to 11.8 percent, according to a filing last week. Together, the pair has overtaken T. Rowe Price Group as the largest Times shareholder. Price has a 12.6-percent stake.

The two funds have also expressed "disappointment" with the company's preliminary proxy statement, filed last week, that did not include any of their four nominees for board seats. The publisher, which owns Times, The Boston Globe, the International Herald Tribune, and more than 30 websites, has set its annual meeting for April 22, at which it will elect the board.

Alleging a flawed digital strategy, the hedge funds noted in a January filing with the Securities and Exchange Commission that they were gearing for a board contest although they owned just a 4.9-percent stake at the time. Their nominees include: Firebrand founder Scott Galloway, Mayfield Fund media-focused venture capital executive Allen Morgan, former AOL executive Gregory Shove, and Kohlberg & Co. LLC co-founder James Kohlberg.

In its preliminary proxy filing last week, the Times reiterated its own nominees and in a letter to shareholders, chairman Arthur Sulzberger Jr. urged them "not to sign or return any proxy card that you may receive from Harbinger."

The Times' new director nominees include: Robert Denham, a managing partner with law firm Munger, Tolles & Olson LLP and former Salomon chairman and CEO; and Dawn Lepore, chairman and CEO of Drugstore.com and an eBay board member.

The company said earlier this month that Brenda Barnes, the chairman and chief executive of Sara Lee Corp., and former Gillette Co. James Kilts would not stand for re-election.

The Times also said in its filing Thursday that it had nominated Thomas Middelhoff as a Class A director, once a Class B choice, alongside Class A directors William Kennard and Doreen Toben.

In response, a Firebrand-Harbinger spokesman said: "As the company's largest shareholder, with over 15 percent of the Class A shares, we are particularly concerned that the company refused to interview any of our nominees despite our repeated offers to meet at their convenience. Shareholders are faced with a clear choice: to support directors that have been hand picked by the current board, or truly independent directors put forward by the largest shareholder who is already effecting positive change."

The pair expects to file their own proxy next week, having retained proxy solicitor D.F. King & Co. The hedge funds have indicated they won't lobby for change to the company's two-class share structure, under which the Sulzberger family can elect 70% of the board, or nine directors, and public shareholders can elect the remaining four directors.