Knight Ridder draws suitors

The world will get a glimpse of how desirable, or not, newspapers are, as preliminary bidding begins for Knight Ridder.

The Beacon Journal in a report by KRI reporters Chris O’Brien and Pete Carey on the business front on Saturday said two major newspaper companies–Gannett and McClatchy–and a handful of private equity firms have expressed interest in buying Knight Ridder “raising the chances that the Akron Beacon Journal’s corporate parent could be sold sometime next year.”

A source familiar with the bidding process for the nation's second-largest newspaper group also confirmed that MediaNews, a Denver newspaper company, was said to be interested in joining a bidding coalition, but had not yet submitted its own bid.

On the private equity side, as expected, Knight Ridder received a joint bid from a trio of prominent firms -- Blackstone, Providence Equity and Kohlberg Kravis Roberts & Co. Also expected to submit preliminary bids were Texas Pacific Group, Thomas H. Lee Partners, Madison Dearborn Partners and Spectrum Equity Partners. It was unclear Friday whether each of these firms was bidding separately or as part of some coalition.

Knight Ridder is now expected to move to a second round by inviting some or all of the bidders to examine its internal finances and visit with management and its newspapers.

If the next round doesn't produce bids well above the current stock price, it could open the door for Knight Ridder Chief Executive Tony Ridder to present an alternative plan to shareholders that keeps the company intact and ends pressure for a sale.

``I think you could argue that if there is a way to keep most of the properties together under the Knight Ridder banner, that would be his preference,'' said Barry Lucas, an analyst at Gabelli & Co., whose affiliate, GAMCO, owns about 1 percent of Knight Ridder's stock. ``And if there's a lack of vigorous interest, it could play into that scenario.''

Wall Street remained skeptical that a sale would occur. Knight Ridder's stock fell 23 cents to $61.25 on Friday as only about half the number of shares that typically sell changed hands. Analysts said a company's stock usually gets a substantial boost if it's for sale. While Knight Ridder's stock rose early last month, it has hovered around $60 since.

The current bidding process was triggered Nov. 1 when Knight Ridder's largest shareholder, Private Capital Management, demanded the company put itself up for sale, citing a lagging stock price. Within a week, the second- and third-largest shareholders had made similar demands, leaving Knight Ridder facing a shareholder revolt by firms that control 37 percent of its stock.

Click on the headline to read the full story in the BJ

As investment bankers review initial expressions of interest from possible buyers, community leaders where Knight Ridder publishes are weighing what a sale could mean to their region. The Philadelphia Inquirer discusses the subject in a story you can find at:

http://www.philly.com/mld/inquirer/business/13364151.htm

The newspaper industry is on the defensive, with circulation stagnant, advertising dollars migrating to the Internet and newsrooms reducing their work forces to save costs.

Given all that, it may be hard to believe that newspapers are actually profitable, but they are. And Knight Ridder is among the most profitable.

You can find a 10-page analysis report in an Adobe Acrobat (pdf) file at the site of Morgan Stanley. The url is:

http://www.poynterextra.org/KR/Research.pdf