Knight Ridder Inc.'s largest shareholder Tuesday called for a sale of the San Jose-based newspaper publisher, citing management's inability to bolster the company's share price and profit. The stock rose 8.7%, its biggest surge in 18 years.
Private Capital Management wrote to Knight Ridder's board urging it to auction the company. The firm said in a regulatory filing that it owns 19% of Knight Ridder, owner of the San Jose Mercury News, the Miami Herald and other papers.
The push for a sale underscores the frustration of newspaper investors who have seen the value of their holdings decline as advertisers spend more money on the Internet and cable television. Ad sales at Google Inc., the largest Web search engine, this year have outstripped Knight Ridder's by 2-to-1.
"Companies that make their living providing news are discovering that it's not as profitable as people would like them to be," said Lee Wilkins, a University of Missouri journalism professor.
Knight Ridder spokesman Polk Laffoon didn't return a call requesting comment. Chad Atkins, general counsel at Private Capital, declined to comment.
Shares of Knight Ridder rose $4.62 to $58, their biggest jump since a 15% rise that followed the October 1987 stock market crash. Tuesday's gains helped trim the stock's year-to-date decline to 11.9%.
Knight Ridder's breakup value is greater than its market value, Private Capital Chief Executive Bruce Sherman said in the regulatory filing. The company is beset by consolidation among its advertisers, competition from the Internet and lack of a national newspaper that may spur ad sales on its websites, he said.
"The board should now aggressively pursue the competitive sale of the company," Sherman wrote in a letter to Knight Ridder's board of directors that was included in the filing.
Private Capital, based in Naples, Fla., said it had paid $840 million to acquire 12.8 million shares of common stock in Knight Ridder.
Other newspaper companies are less likely to go up for auction because families that control them may be unwilling to sell, said Henry Berghoef, head of research at Chicago-based Harris Associates.