Sun-Times shareholder demands ouster of CEO

CHICAGO - The third-largest shareholder in the Sun-Times Media Group Inc. on Friday called for the ouster of Chief Executive Cyrus Freidheim Jr. and the replacement of most of the board to enact "dramatic steps" to turn the company around.

Davidson Kempner Capital Management LLC, which holds a 5.9 percent stake in the company, said in a letter to board Chairman Raymond Seitz it sought to enact the board overhaul at the scheduled meeting on Nov. 17.

"Sun-Times, along with other major newspaper publishers in the United States, will face unparalleled operating challenges in the coming years," Davidson Kempner managing director Jame Donath wrote. "In order for Sun-Times to have a sound future, dramatic steps must be taken immediately. The window of opportunity to accomplish this turnaround is narrow at best."

Donath said the company has burned $20 million in cash per quarter since 2006 and faces weakening consumer demand, higher ink and paper costs, a slowdown in advertising and a shift to the consumption of news online.

He suggested replacing the entire board except for lead portfolio strategist Robert Poile of Polar Securities, which holds a 10.7 percent stake. The fund offered up four of its own board candidates and asked that the board be trimmed to five members from seven.

"We have not coordinated our recommendations with other shareholders but expect, based on past discussions with them, that such a transition would garner their full support," Donath wrote.

The Sun-Times Media Group publishes the Chicago Sun-Times and some 70 community papers in the Chicago area.

The Sun-Times said its flagship's average Monday-to-Friday circulation fell 3.9 percent to 313,176 in the six months to Sept. 30 compared to a year earlier, while its Sunday circulation rose 4.5 percent to 255,905, according to the Audit Bureau of Circulations.

On Friday, the parent company's shares rose 2 pennies to 7 cents, down from 50 cents in mid-May.

The company reports its third-quarter earnings on Thursday.

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