I have a piece in the debut issue of Conde Nast Portfolio. In “The Paper Shredder,” I profile Bruce Sherman, CEO of Private Capital Management. He manages $24 billion, and is the enigmatic asset manager who forced the breakup of the Knight Ridder newspaper chain in 2006. Sherman’s coup sent ripples through the newspaper industry, which has since seen the sale of the Tribune Co. to Chicago billionaire maverick Sam Zell, and Morgan Stanley Investment Management’s very public and messy campaign to unseat the Sulzberger family’s control of the New York Times.
This is the first public interview Sherman has granted since he became the scourge of American newspaper journalism. Oh, and his cousin happens to be Judge Judy. From the piece:
Sherman (no relation to this writer) is the mysterious investor who forced Knight Ridder to sell itself last year to the McClatchy Co. in a $6.5 billion deal. Journalism has since suffered what might best be described as a collective panic attack. After all, Knight Ridder, owner of the Philadelphia Inquirer, the Miami Herald, and 30 other daily papers, had been the second-largest newspaper publisher in the country, with 2005 revenues of $3 billion, and it was bought by a company half its size. Moreover, it was the first time that an activist shareholder had successfully engineered the breakup of a publicly traded newspaper company, and it left Knight Ridder C.E.O. Anthony Ridder reeling from the rope-a-dope tactics Sherman used to oust him. Sherman, it turns out, is a guy who doesn’t like surprises but who is adept at springing them.
Still, the McClatchy deal, which involved 60 percent cash, 40 percent McClatchy stock, and $2 billion in assumed debt, may not have been what Sherman was hoping for. Ridder speculates that Sherman’s gambit may have been fueled by his hope that Gannett, the giant owner of USA Today, would jump in with a premium all-cash offer for Knight Ridder—giving Sherman a face-saving exit for his clients with Knight Ridder holdings. Indeed, Ridder asked Sherman why he had singled out his company for a forced sale, given his huge investments in other newspapers’ stocks. The reply (according to Ridder): “You’re not big enough to buy Gannett, but they’re big enough to buy you.” Sherman does not recall giving this response.
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