McClatchy to buy Knight-Ridder for $4.5 billion

NEW YORK, March 13 (Reuters) - McClatchy Co. on Monday said it would acquire fellow newspaper publisher Knight-Ridder Inc. for $4.5 billion in cash and stock.

McClatchy will offer $40 cash and 0.5118 Class A shares for each Knight-Ridder share. The deal values Knight-Ridder at $67.25 per share, above its closing price of $65 on Friday.

The combined company will operate 32 daily newspapers and 50 nondailies after the sale of 12 Knight-Ridder papers, including the Philadelphia Inquirer and the San Jose Mercury News.

It will rank as the second-largest U.S. newspaper publisher based on a daily circulation of about 3.2 million people. McClatchy said it expected the deal to close within three to four months.

McClatchy said it would have had 2005 revenue of $2.83 billion and earnings of $754 million before interest, tax, depreciation and amortization if it had owned all the Knight-Ridder papers it planned to retain.

The company said it would assume about $2 billion in Knight-Ridder debt at closing.

McClatchy said it expected the deal to reduce earnings per share in the mid-single-digit percentage range in the first year after closing, then add to profit by 2008.