Thursday, September 11, 2008

How the shrewder CEO cashed out at MNI

The year 2007 was a tough one at the McClatchy Co., as it struggled to integrate the complex and costly acquisition of Knight Ridder at the same time a steady deterioration in advertising sales began picking up steam.

But the company seemed to be in luck. It had not one, but two, experienced chief executives on its board of directors – the incumbent Gary Pruitt and former Knight Ridder boss Tony Ridder.

Unfortunately for MNI shareholders, the shrewder one evidently got away. Tony left the board in May.

Before he departed, however, Tony demonstrated his superior wisdom by dumping at least 87% of his MNI stock, according to filings at the Securities and Exchange Commission. In transactions completed as of Nov. 30, 2007, he netted $3.6 million at an average price of $39.61 per share, or roughly 10.7 times more than the stock would be worth today at its close of $3.69 a share.

Gary Pruitt, the guy who stuck around, did hedge his bets to some degree, selling about half his shares as of Feb. 4, 2008. Gary collected $3.1 million at an average price of $32.59 per share, or roughly 8.8 times more than the stock would be worth today.

After being paid some $20.6 million for engineering the sale of KRI to McClatchy in the summer of 2006, Tony probably wasn’t hard up for cash. So, his decision to liquidate nearly all of his McClatchy holdings suggests that he suspected things were not going swimmingly in Sacramento.

Could Tony have been alarmed by the burden of the more than $2 billion in debt that MNI shouldered to help fund the $4 billion-plus KRI acquisition?

Was Tony worried about the company’s inability to develop cutting-edge products and strategies to create new sources of revenue in response to the quickening decline in the traditional newspaper advertising business?

Did he doubt the discipline of management to aggressively cut expenses enough to fund the transition of the business away from its print legacy and into the digital future?

Or, was Tony simply concerned that McClatchy’s senior managers were too inbred and too self-absorbed to objectively face up to the company’s growing problems?

These issues evidently were clear enough to motivate Tony to get out while the getting was good.

So, you have to wonder: Did Gary miss them? Or just not know what to do?

Disclosure: I own MNI shares.

6 Comments:

Anonymous Anonymous said...

This is Tony just being Tony, looking out for himself with little regard for others.

5:03 AM  
Anonymous Anonymous said...

There's such a thing as good luck.

Which, given Tony's record of bald mismanagement of Knight Ridder, seems like the most likely explanation.

7:21 AM  
Blogger Lex said...

With the stock market...who ever really knows when to sell?

I got lucky once.

I sold all my MNI in April 2004...at a little over $70 per share...pretty close to the top.

But I kept all my Tribune stock right until Zell took over...and $20 below the $55+ peak...yet my 401K made a small profit.

However, I still have ALL my Gannett stock...many thousands below the price I paid for it...more than a decade ago.

Perhaps I'm a hopeless optimist but I believe in PAID news gathering.

I guess I still have some ink in my veins despite the destructive Bowater/Google/Craigslist effect.

I also believe SOME newspaper organizations will survive and even thrive in the internet/cellular user age.

Germany and India are two current examples.

However, whether most American managers can respond...and quickly enough...is still in doubt.

Thus, newspaper prices remain extremely depressed...except for bargain hunters like Mexico's Carlos Slim...and the so-called "value" hedge funds.

9:59 AM  
Anonymous Anonymous said...

Tony always knew when to cut and run. If you look at the KRI sale to MNI, it was perfectly timed to get the maximum price at the heighth of the market. Think what KRI would bring today and you will see what I mean. Also sale of MNI stock came at the right time, too. So he was a better stock-timer than he was a newspaper executive. Not much of an epitaph there.

8:28 PM  
Anonymous Anonymous said...

not good deal for knight ridder

9:51 PM  
Anonymous Anonymous said...

Earlier in the spring, you said the layoffs announced at the time were not enough to see the newspaper companies through this crisis. You were right, dammnit. MNI announced today a further 10 percent cut, and I suspect others are following as the accountants tally the results of 15-18 percent revenue declines. So how much blood is enough, or do you not see an end to this? Perhaps you should update your forecast.

3:37 PM  

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