Gray Lady takeover talk

Rumors hit N.Y. Times

The Gray Lady’s ownership situation is growing more colorful.

Reports circulated on Wall Street last week that the New York Times could be a takeover target, sending the company’s share price up nearly 5%.

Investors began snapping up certain kinds of options that suggest they believe the price could shoot up in the coming weeks, likely because of a takeover bid.

Essentially, the options, known as calls, allow investors to buy shares at a price higher than the current trading price. An increase in calls means investors believe the stock price could abruptly surge.

The New York Times recenty saw options activity grow to three times the norm. Investors were guarded about who would execute a takeover, though options activity is traditionally considered a good indicator of takeover interest.

Company is controlled by the Sulzberger family, which owns 89% of Class B stock. That stock confers the right to elect the majority of company’s board and isn’t publicly traded. The other type, Class A stock, is publicly traded.

Observers pointed out that the Sulzberger family’s tight control of the company would make any buyout a difficult proposition. But Morgan Stanley and other investors have been calling for elimination of the two-tiered system, which they say gives too much control to the Sulzberger family. In addition to criticizing the family’s general stewardship of paper, investors protested the status quo by not voting for directors at company’s annual meeting this year.

Separately last week, Morgan Stanley disclosed it had upped its share in company’s Class A stock to 8%. That move, too, suggests confidence in a near-term spike.

The New York Times Co. controls nearly a dozen newspapers, including the Boston Globe.

The New York Times is trying to lower its overhead, recently selling its broadcast group, as well as to persuade Wall Street that its hybrid online-print model is viable in the age of new media.

Wall Street had remained unmoved, dropping the stock more than 15% over the past seven months before takeover rumors fueled last week’s spike.

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