To Win the Lady
Friday, February 22, 2008
Who is this muscleman with the sword who wants to fight his way onto the board of the New York Times Co.?
His name is Scott Galloway, he's 43, and he was unknown to the Times Co. two weeks before Christmas. Since then, he has purchased more than 15 percent of the company's stock and proposed a slate of four directors -- including himself -- that was effectively shot down by the company yesterday.
He now appears girded for battle. In fewer than three months, Galloway and his hedge fund partners have become the largest non-family shareholders of Times Co. stock. Yesterday, they said they would file a rival proxy for their spurned director nominees next week, setting up an election showdown at the company's April 22 shareholders meeting.
Galloway has done all of this while teaching a course at New York University's Leonard N. Stern School of Business, raising a 5-month-old son with his fianc¿, mixing it up in an exclusive New York club for high-powered alphas and watching the company he founded a decade ago run out of money.
As for the sword, Galloway, a Scot by descent, allowed himself to be dressed as a character from Mel Gibson's "Braveheart" for a charity fashion show in 2006. Thanks to the Internet, the one-time appearance lives forever. And it is not exactly an image that screams "Gray Lady."
Despite the tartan, the blue face paint and the sword, Galloway had been trying to persuade the family-controlled Times Co. that he is no barbarian at the gate. In a January letter to the company, Galloway was almost deferential, saying it should retain family ownership but put some new blood on its board -- directors with Internet and capital allocation experience.
But yesterday, the Times Co. dealt Galloway's efforts a blow. In a preliminary proxy filed at the Securities and Exchange Commission, the Times Co. listed its four nominees for the board in preparation for the shareholders meeting. None of Galloway's slate was among them. In a statement yesterday, Galloway's spokesman called the Times Co.'s move "disappointing," and noted that the company did not interview any of his candidates.
Galloway's bid marks the first time a non-Ochs-Sulzberger family shareholder has proposed a slate of directors.
Galloway has not publicly commented on the Times Co. himself. The information in this article was gathered from people who have worked with Galloway, are familiar with his thinking and are close to situation at the Times Co. Most spoke on the condition of anonymity because they may work with Galloway in the future and do not want to harm their relationship with him, or are commenting on details that have not been made public.
With his hedge fund partner -- Harbinger Capital Partners, a division of Harbert Management and a buyer of distressed properties -- Galloway's Firebrand Partners saw a Times Co. with a sagging stock price and what they believed was an inadequate digital strategy.
Indeed, with a market capitalization of $2.8 billion, the single most valuable asset the Times Co. owns, some analysts say, is its new midtown Manhattan headquarters, which may be worth as much as $1 billion. Some have caustically remarked that the Times Co. is now a REIT -- a real estate investment trust -- with a newspaper attached.
Like almost all newspapers, the Times has lost readers and advertising revenue to numerous rivals, particularly the Internet. Its New England papers -- the Boston Globe and the Worcester (Mass.) Telegram & Gazette -- have been especially hard-hit. The company was forced to take a staggering $814 million write-down on their diminished value in 2006. Last week, Times Executive Editor Bill Keller said that 100 of 1,332 Times newsroom positions would be cut through early retirement buyouts, attrition and possibly layoffs.