Newspapers may have an angel

Or at least that is the headline of a story in the San Francisco Chronicle:

Billionaire Burkle emerges as possible buyer, union says

He's a billionaire supermarket magnate who started at age 13 bagging groceries at the Stater Bros. food market his dad managed. He backed P. Diddy's clothing company, feuded with Michael Ovitz, advised Michael Jackson on selling the Beatles catalog and ponied up for Al Gore's cable TV network. He's a longtime Friend of Bill (Clinton) and big-time Democratic donor and fundraiser who also gave generously to Republican Govs. Pete Wilson and Arnold Schwarzenegger.

Now Ron Burkle, 53, has emerged as a suitor for the dozen newspapers McClatchy Co. is unloading in the wake of its $4.5 billion purchase of Knight Ridder Inc.

The union representing workers at many of the papers tapped Burkle, head of closely held investment firm Yucaipa Cos. of Los Angeles, as a deep-pocketed investor to bid on the papers. By some estimates, the dozen papers on the block, which include the San Jose Mercury News, Contra Costa Times, Philadelphia Inquirer and St. Paul Pioneer Press, could sell for $1.5 billion to $2 billion.

If Burkle's bid were accepted, the papers would be run by a new company called ValuePlus Media that would offer employees a chance to buy ownership stakes. Workers who chose to invest in the company would roll over part of their 401(k) funds to acquire ValuePlus shares, an arrangement called an employee stock ownership plan, taking on the benefits and risks of equity ownership. If enough participated, the new company would enjoy significant tax savings.

Comments from the blogger:

The guessing game is raging this week on what will happen to the dozen newspapers dropped out of the Knight Ridder sale.

Here’s a point rarely discussed:

There were nine newspapers in the Knight Ridder chain with Guild (union) contracts and all but the Lexington, KY, Herald-Leader are in the group of 12 newspapers cut out of the sale of Knight Ridder.

Lexington is apparently a big enough profit maker that it missed the cut. You might recall that Lexigton recently decided (after the retirement of Larry Froelich) that they don’t even need a news editor.

So it is great to say that if the damn papers weren’t union this would not have happened. It is of course, quid pro quo, that the reason they might not make as much profit as others in the chain is that they are required to pay decent wages.

The other four non-union papers were the Fort Wayne (IN) News Sentinel,. The Contra Costra (CA) Times, the Wilkes Barre (PA)Times Leader and the Aberdeen (SD) American-News. These were all in slow-growing, not profitable areas.

Bruce Sherman, CEO of Private Capital Management, the largest owner of Knight Ridder Inc. stock, had high hopes that selling the newspaper company would provide a big pop in the stock price.What he got was more of a fizzle.

Private Capital Management owns 12.1 million shares of Knight Ridder at an average cost of $65.50 a share, just shy of the cash-and-stock price of $67 a share that California-based McClatchy Co. agreed Monday to pay for Knight Ridder."It was not a raging success," said Peter Tanous, a Washington-based investment fund adviser and author who has profiled Sherman and done business with him.