Knight Ridder May Sell Company; Goldman Will Advise

Nov. 14 (Bloomberg) -- Knight Ridder Inc., publisher of the Beacon Journal, Philadelphia Inquirer and Miami Herald, will consider a sale of the company after its biggest shareholders demanded executives address a 20 percent drop in the stock.

Goldman Sachs Group Inc. will help evaluate ``strategic alternatives,'' San Jose, California-based Knight Ridder said in a statement today. Knight Ridder is valued at $4.23 billion.

Newspapers have been hurt by a 2.6 percent drop in circulation in the past six months and the defection of advertisers to the Internet. Knight Ridder's three top shareholders owning more than 36 percent of the stock pushed Chief Executive Officer Tony Ridder for action after three quarters without sales growth. Buyers may range from private equity firms to smaller newspapers teaming up with a financial backer, said Morgan Stanley analyst Doug Arthur.

``Their choices started to get limited,'' said Arthur, who is based in New York and has an ``overweight'' rating on the shares. He doesn't own any personally. ``A lot of people will take a look at it, because the papers are in very attractive markets and there are strong Internet properties.''

Shares of Knight Ridder rose $1.08, or 1.7 percent, to $63.58 at 11:46 a.m. in New York Stock Exchange composite trading. The shares had slid 20 percent this year through Oct. 31, the day before the biggest holder asked for a sale.

Knight Ridder said it won't disclose developments during the process. It also amended its bylaws to let shareholders submit proposals at its 2006 annual meeting.

``I would not be surprised if a private group ended up buying Knight-Ridder and then took their time and sold off the assets to strategic buyers,'' said Ed Atorino, managing director at New York- based research company Benchmark Co. He estimates a private equity company may bid more than $70 a share.

Knight Ridder, formed in 1974 with the merger of Knight Newspapers and Ridder Publications, has expanded into 29 markets with 32 newspapers. Ridder started in 1892 when CEO Tony Ridder's great-grandfather took over New York's German-language Staats- Zeitung. Charles Landon Knight bought the Akron Beacon Journal in 1903 and left the newspaper to his son 30 years later.

Knight Ridder and Gannett Co., the biggest U.S. newspaper publisher, are the only two U.S. newspaper companies without family ownership or dual classes of stock, according to Credit Suisse First Boston. The New York Times Co. is controlled by the Sulzberger family and Dow Jones & Co. by the Bancroft family. Some Bancrofts have pressed the company for changes this year.

The biggest newspaper deal so far this year was the June purchase of Pulitzer Inc. by Lee Enterprises Inc. for $1.46 billion. The deal valued Pulitzer, owner of the St. Louis Post- Dispatch, at about 17 times last year's earnings before interest, tax, depreciation and amortization, according to calculations based on Bloomberg data.

A similar multiple would value Knight Ridder's debt and equity at about $12 billion, twice its current so-called enterprise value. The company had about $2 billion of debt at the end of September.

Knight Ridder spokesman Polk Laffoon said no timeline has been set and wouldn't comment further on today's announcement.

To contact the reporter on this story:
Anthony Massucci in New York at amassucc@bloomberg.net.

Last Updated: November 14, 2005 11:49 EST

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