Barron’s Break-Up Value, NYTimes $35

Barron’s made the point in their current issue (February 5, 2007) and their November 13, 2006 issue that The New York Times Company (NYT) is worth $35 a share. That may well be. If the company sold off About.com, the New York newspaper, the properties in and around Boston, and other small newspapers, it is not far-fetched that they would be worth more than the $24 that the shares fetch now.

Of course, the company is controlled by the Sulzberger family due to the company’s two classes of shares. Through a trust, they effectively control the board.

Morgan Stanley Investment Management, which owns a large stake in the company, is trying to get the two share classes eliminated. So far, no dice.

All of this is well-known, and old news.

What is not is whether Morgan Stanley and other large shareholders would attempt to take the issue to federal court, making the argument that the dual-share class depresses the value of the company, and, therefore, violates the fiduciary responsibilities of both the Sulzbergers and the current board. It would be a carefully followed case since other companies like Dow Jones (DJ) have similar dual share arrangements.

The NYT might argue that investors like Morgan Stanley bought the stock with their eyes wide open, aware of the dual share deal. But, the management, the family, and the board still might be found to have liability in holding the value of the company down, artificially. Perhaps a court would find that this is indeed a problem, if other shareholders suffer.   

Morgan Stanley has the money to go to court, but do they have the guts.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies he writes about.