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McClatchy buying Knight-Ridder; Selling 12 papers

Written by: Staff
|

NEW YORK, Mar 13 (Reuters) Newspaper publisher McClatchy Co. on Monday said it would buy Knight-Ridder Inc. for .5 billion in cash and stock, eliciting a lukewarm Wall Street response to a deal that put the spotlight on the health of the U.S. newspaper industry.

McClatchy will pay cash and 0.5118 Class A shares for each Knight-Ridder share. The deal values Knight-Ridder at .25 per share, above its closing price of on Friday.

The combined company will become the second-largest U.S.

newspaper chain based on a daily circulation of about 3.2 million people. It will operate 32 daily newspapers and 50 non-dailies after the sale of 12 Knight-Ridder papers -- including some of its best known titles such as the Philadelphia Inquirer and the San Jose Mercury News.

''This thing is being sold at a fire-sale price,'' John Morton, a veteran newspaper analyst said. ''This is a bad time to sell a newspaper company -- Knight Ridder's board of directors should not have done it.'' The acquisition, which Wall Street hoped would give the sector a lift and possibly spark another round of mergers and deals this year, is unlikely to do so given the relatively low multiple, one newspaper analyst said.

The deal values Knight Ridder at a multiple of about eight to nine-times its 2005 cashflow and is considered below that of a deal to sell Pulitzer Inc. last year, newspaper industry analysts said.

Lee Enterprise's purchase of Pulitzer fetched a multiple of about 12 to 13.

Shares of McClatchy and Knight Ridder were down 0.34 per cent and up 0.38 per cent respectively in premarket trading.

The sale of the 12 papers will help pay down debt used to finance the deal and help minimise cost-saving measures, McClatchy CEO Gary Pruitt said in an interview on cable TV network CNBC.

''We have no plans for layoffs at the newspapers,'' Pruitt said.

''There will of course be some consolidation at corporate offices and some Internet operations. But we plan to maintain, sustain and further the journalism at these newspapers.'' McClatchy said it expected the deal to close within three to four months.

Key investors in Knight-Ridder began agitating for a sale in November, saying the company had failed to provide enough value for shareholders.

The sale process underlined the difficulty of newspaper publishers fending off competition from Internet news sources, diminishing margins and a series of circulation scandals.

A consortium consisting of Bain Capital, Hellman&Friedman, Texas Pacific Group and Thomas H. Lee Partners also placed a bid for Knight Ridder by Thursday's bid deadline, but it was unclear whether other potential suitors made formal offers.

McClatchy said it would retain Knight-Ridder newspapers serving its fastest-growing markets, including the Miami Herald, the Kansas City Star and the Charlotte Observer. The purchase also gives McClatchy a one-third stake in online job site CareerBuilder.com.

Despite newspaper struggles across the United States, McClatchy's Pruitt said that the company's local presence was key to its growth.

''Our local competitors have fragmented audiences. As a result, we're the last mass medium. We're holding onto that audience better than anybody else, albeit it's slipping slowly each year,'' Pruitt said on CNBC. ''We're the leading local media company and our markets are growing 50 per cent faster than the U.S. average.'' McClatchy, whose own publications include the Sacramento Bee and Minneapolis Star Tribune, said it would have had 2005 revenue of NEW YORK, Mar 13 (Reuters) Newspaper publisher McClatchy Co. on Monday said it would buy Knight-Ridder Inc. for $4.5 billion in cash and stock, eliciting a lukewarm Wall Street response to a deal that put the spotlight on the health of the U.S. newspaper industry.

McClatchy will pay $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 become the second-largest U.S.

newspaper chain based on a daily circulation of about 3.2 million people. It will operate 32 daily newspapers and 50 non-dailies after the sale of 12 Knight-Ridder papers -- including some of its best known titles such as the Philadelphia Inquirer and the San Jose Mercury News.

''This thing is being sold at a fire-sale price,'' John Morton, a veteran newspaper analyst said. ''This is a bad time to sell a newspaper company -- Knight Ridder's board of directors should not have done it.'' The acquisition, which Wall Street hoped would give the sector a lift and possibly spark another round of mergers and deals this year, is unlikely to do so given the relatively low multiple, one newspaper analyst said.

The deal values Knight Ridder at a multiple of about eight to nine-times its 2005 cashflow and is considered below that of a deal to sell Pulitzer Inc. last year, newspaper industry analysts said.

Lee Enterprise's purchase of Pulitzer fetched a multiple of about 12 to 13.

Shares of McClatchy and Knight Ridder were down 0.34 per cent and up 0.38 per cent respectively in premarket trading.

The sale of the 12 papers will help pay down debt used to finance the deal and help minimise cost-saving measures, McClatchy CEO Gary Pruitt said in an interview on cable TV network CNBC.

''We have no plans for layoffs at the newspapers,'' Pruitt said.

''There will of course be some consolidation at corporate offices and some Internet operations. But we plan to maintain, sustain and further the journalism at these newspapers.'' McClatchy said it expected the deal to close within three to four months.

Key investors in Knight-Ridder began agitating for a sale in November, saying the company had failed to provide enough value for shareholders.

The sale process underlined the difficulty of newspaper publishers fending off competition from Internet news sources, diminishing margins and a series of circulation scandals.

A consortium consisting of Bain Capital, Hellman&Friedman, Texas Pacific Group and Thomas H. Lee Partners also placed a bid for Knight Ridder by Thursday's bid deadline, but it was unclear whether other potential suitors made formal offers.

McClatchy said it would retain Knight-Ridder newspapers serving its fastest-growing markets, including the Miami Herald, the Kansas City Star and the Charlotte Observer. The purchase also gives McClatchy a one-third stake in online job site CareerBuilder.com.

Despite newspaper struggles across the United States, McClatchy's Pruitt said that the company's local presence was key to its growth.

''Our local competitors have fragmented audiences. As a result, we're the last mass medium. We're holding onto that audience better than anybody else, albeit it's slipping slowly each year,'' Pruitt said on CNBC. ''We're the leading local media company and our markets are growing 50 per cent faster than the U.S. average.'' McClatchy, whose own publications include the Sacramento Bee and Minneapolis Star Tribune, said it would have had 2005 revenue of $2.83 billion and earnings of $754 million before interest, tax, depreciation and amortisation 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 and McClatchy will add two Knight Ridder directors to its board.

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.

''We think the multiple paid is unlikely to produce much cheer for newspaper investors,'' Lauren Fine, an analyst at Merrill Lynch, wrote in a research note.

REUTERS SD DB2005 .83 billion and earnings of 4 million before interest, tax, depreciation and amortisation if it had owned all the Knight-Ridder papers it planned to retain.

The company said it would assume about NEW YORK, Mar 13 (Reuters) Newspaper publisher McClatchy Co. on Monday said it would buy Knight-Ridder Inc. for $4.5 billion in cash and stock, eliciting a lukewarm Wall Street response to a deal that put the spotlight on the health of the U.S. newspaper industry.

McClatchy will pay $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 become the second-largest U.S.

newspaper chain based on a daily circulation of about 3.2 million people. It will operate 32 daily newspapers and 50 non-dailies after the sale of 12 Knight-Ridder papers -- including some of its best known titles such as the Philadelphia Inquirer and the San Jose Mercury News.

''This thing is being sold at a fire-sale price,'' John Morton, a veteran newspaper analyst said. ''This is a bad time to sell a newspaper company -- Knight Ridder's board of directors should not have done it.'' The acquisition, which Wall Street hoped would give the sector a lift and possibly spark another round of mergers and deals this year, is unlikely to do so given the relatively low multiple, one newspaper analyst said.

The deal values Knight Ridder at a multiple of about eight to nine-times its 2005 cashflow and is considered below that of a deal to sell Pulitzer Inc. last year, newspaper industry analysts said.

Lee Enterprise's purchase of Pulitzer fetched a multiple of about 12 to 13.

Shares of McClatchy and Knight Ridder were down 0.34 per cent and up 0.38 per cent respectively in premarket trading.

The sale of the 12 papers will help pay down debt used to finance the deal and help minimise cost-saving measures, McClatchy CEO Gary Pruitt said in an interview on cable TV network CNBC.

''We have no plans for layoffs at the newspapers,'' Pruitt said.

''There will of course be some consolidation at corporate offices and some Internet operations. But we plan to maintain, sustain and further the journalism at these newspapers.'' McClatchy said it expected the deal to close within three to four months.

Key investors in Knight-Ridder began agitating for a sale in November, saying the company had failed to provide enough value for shareholders.

The sale process underlined the difficulty of newspaper publishers fending off competition from Internet news sources, diminishing margins and a series of circulation scandals.

A consortium consisting of Bain Capital, Hellman&Friedman, Texas Pacific Group and Thomas H. Lee Partners also placed a bid for Knight Ridder by Thursday's bid deadline, but it was unclear whether other potential suitors made formal offers.

McClatchy said it would retain Knight-Ridder newspapers serving its fastest-growing markets, including the Miami Herald, the Kansas City Star and the Charlotte Observer. The purchase also gives McClatchy a one-third stake in online job site CareerBuilder.com.

Despite newspaper struggles across the United States, McClatchy's Pruitt said that the company's local presence was key to its growth.

''Our local competitors have fragmented audiences. As a result, we're the last mass medium. We're holding onto that audience better than anybody else, albeit it's slipping slowly each year,'' Pruitt said on CNBC. ''We're the leading local media company and our markets are growing 50 per cent faster than the U.S. average.'' McClatchy, whose own publications include the Sacramento Bee and Minneapolis Star Tribune, said it would have had 2005 revenue of $2.83 billion and earnings of $754 million before interest, tax, depreciation and amortisation 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 and McClatchy will add two Knight Ridder directors to its board.

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.

''We think the multiple paid is unlikely to produce much cheer for newspaper investors,'' Lauren Fine, an analyst at Merrill Lynch, wrote in a research note.

REUTERS SD DB2005 billion in Knight-Ridder debt at closing and McClatchy will add two Knight Ridder directors to its board.

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.

''We think the multiple paid is unlikely to produce much cheer for newspaper investors,'' Lauren Fine, an analyst at Merrill Lynch, wrote in a research note.

REUTERS SD DB2005

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