Sherman was very good at another thing. Nine years later, with the banking sector having recovered from the savings-and-loan scandals, he brokered the sale of Local Financial back to Townsend—for $160 million.

Historically, newspapers were just the kind of investment through which Sherman built his wealth—and he may yet again. He has, after all, amassed a net worth of hundreds of millions of dollars by swimming upstream. For decades, owning a monopoly newspaper in a growing urban market was a license to print money. In some markets, it still is, though as public companies have gobbled up local papers, the measures of success have become margins and growth prospects. Knight Ridder remained robustly profitable when Sherman forced the shotgun wedding with McClatchy, but its margins were lackluster and its growth prospects moribund, making asset managers like Sherman very unhappy.

Sherman first invested in newspaper stocks in 2000, admittedly a time when that juggernaut known as the internet was still recovering from its own crash, dial-up modems were still widespread, and Google was thought of as a mere search engine. But all that soon changed radically, and Sherman found himself with a huge pile of stocks in an industry whose fundamental business model was mutating, if not crumbling: Readers and advertisers were fleeing to the Web, bloggers were competing for attention and content, and news as a marketable commodity was losing its definition and value.

For 2005, P.C.M.’s net return was actually a 0.9 percent loss. Though returns rebounded to 15 percent in 2006, Sherman’s restive investors couldn’t help but note that his assets had shrunk by more than $3 billion in the past two years. The weak link was Sherman’s newspaper holdings: The New York Times Co., for example, has lost half its value during the time his portfolio has owned the stock. “It’s hard for us to understand what the owners of publicly traded newspaper stocks see as the upside,” says Steven Rattner, who runs the Quadrangle Group’s $2.9 billion media private equity business.

Within Sherman’s $1.79 billion newspaper portfolio, Knight Ridder’s struggles were particularly problematic. The company owned metropolitan papers in depressed markets like Philadelphia and Detroit, and even once-high-flying papers like the Miami Herald had lost readers and advertisers thanks to a combination of changing demographics and management blunders. Knight Ridder’s stock, which had split in 1978 and 1983, seemed bogged down. Moreover, unlike the patriarchal families that control the New York Times, the Washington Post, and the Wall Street Journal, the Ridder clan had failed to create a class of shares that thwart takeovers by granting family owners controlling power to choose the board of directors.

In Anthony Ridder’s estimation, Sherman played coy, then launched an assault that sundered his family’s newspaper chain. Even as P.C.M. bought more and more Knight Ridder stock—eventually becoming the company’s largest shareholder, with a 19 percent stake—Sherman had rebuffed Ridder’s entreaties to meet to discuss his growing holdings. “Bruce was the only large shareholder I didn’t know,” recalls Ridder.

In November 2004, Sherman finally relented and agreed to a meeting in ­Naples. As the two men sat at a ­con­ference table in the early afternoon on Election Day, Sherman spent 90 minutes asking Ridder and two of his executives mostly perfunctory questions. He gave “­zero indication that he was dissatisfied,” Ridder says.

About six months later, however, Sherman apparently became convinced that Ridder was incapable of marshaling Knight Ridder’s papers for the internet age. Sherman telephoned and urged Ridder to put Knight Ridder up for sale. “That was the first time that I heard from him since the meeting,” Ridder says. “My reaction was one of great surprise.” After consulting with the board, Ridder returned Sherman’s call. “My response was, I had no interest in selling.” Ridder and his board launched an aggressive 18-month campaign to try to thwart Sherman, but a buyback of 10 million shares and cost-cutting moves failed to revive the stock. In September 2005, Ridder’s position grew dire when, at a management meeting in Half Moon Bay, California, a senior Knight Ridder executive delivered a report forecasting declining print newspaper revenues for all of Knight Ridder’s papers and the industry as a whole. In November, Sherman filed a letter with the Securities and Exchange Commission calling for Knight Ridder’s sale, then threatened to run for a board seat. As other funds lined up with Sherman, Ridder surrendered. “We were convinced we would ultimately lose,” he says.