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McClatchy Buys the Tribune

This is a partial report from the New York Times on news that Knight-Ridder, which owns The Tribune, is being bought up by the smaller McClatchy newspaper chain. We’ll get local reaction and analysis on Tuesday.

“Knight Ridder, the second-largest newspaper company in the United States, agreed Sunday night to sell itself for about $4.5 billion in cash and stock to the McClatchy Company, a publisher half its size, according to people involved in the negotiations.

The deal, which is expected to be announced on Monday, comes as the newspaper industry is gripped by uncertainty. Readers have begun to drift away from printed newspapers as their Web sites have experienced sharp gains in use.

The sale may help assuage some investors who are nervous about the values of newspaper companies, however, because Knight Ridder commanded a premium of about 25 percent for its shares from the time it put itself up for sale in November under pressure from shareholders who were unhappy with performance of its stock.

Still, McClatchy, which is based in Sacramento and publishes The Sacramento Bee and The Star Tribune in Minneapolis, among others, was the only major newspaper company to submit a final bid for Knight Ridder, publisher of 32 daily newspapers, including such venerable papers as The Miami Herald, The Philadelphia Inquirer and The San Jose Mercury News.

While Knight Ridder attracted interest from some big publishers, including Gannett, the largest chain in the United States, most major newspaper companies passed on the auction entirely, underscoring just how unsettled the biggest players are about their own business.

Under the terms of the deal, McClatchy agreed to pay about $67 a share in cash and stock for Knight Ridder, these people said. About 60 percent of the payment will be in cash, while the rest will be in McClatchy shares.

On Friday, Knight Ridder’s shares rose 4 percent in anticipation that a deal would be reached over the weekend. But those shares had been trading at about $53 a share when Bruce Sherman, a Knight Ridder shareholder, went public with his efforts to put pressure on the company to put itself up for sale.

Because Knight Ridder is so much larger than McClatchy, the merger is likely to create some upheaval for both companies. McClatchy could sell or close some of the Knight Ridder papers and could take further cost-control measures in its own newsrooms to help finance the deal. It was uncertain when the deal would be completed.

Knight Ridder, based in San Jose, Calif., has almost three times as many dailies as the 12 owned by McClatchy. Knight Ridder’s $3 billion in revenue for 2005 was more than twice McClatchy’s $1.2 billion.

The company put itself up for sale partly at the urging of Mr. Sherman, a portfolio manager who runs Private Capital Management, a subsidiary of the brokerage firm Legg Mason.

“McClatchy is a dolphin swallowing a small whale,” said Chuck Richard, an analyst at Outsell Inc., a research firm for the information industry.

Still, the prospect of a McClatchy takeover may bring some relief within Knight Ridder, where some had feared a takeover by investors who had little newspaper experience and were likely to strip down the properties and eventually sell them off.

“I think most everyone in the newsroom has a great deal of respect for McClatchy and the papers it runs,” said Michael Cassidy, a columnist for The San Jose Mercury News, who has worked at the paper for the past 20 years. “Given the various scenarios, including the private equity firms that were involved in the bidding, McClatchy would be a newsroom favorite.”

  1. Guy Murray
    March 14, 2006 at 2:41 pm


    Thanks for this update. Perhaps under their new ownership they won’t be scooped by the Santa Maria Times in running stories like Katcho’s re-election opposition. You can read about that on my Nipomo News Blog located here:


    Dave, I wrote on my blog that I’m hoping you will invite these three candidates for 4th District Supervisor to do several shows with you to get their views out to the public. I know you’ll do a great job!





  2. Ratline in SLO
    March 14, 2006 at 5:24 pm

    This is a story that the Knight-Ridder owned Tribune has ignored as we enter the third month of our Sesquicentennial. Fifty years ago, when they were still the San Luis Obispo Telegram-Tribune, the T-T published a week’s worth of special sections called “Centurama”, celebrating the 100th birthday of the City of San Luis Obispo.

    Those May 1956 sections contained a wealth of stories from the previous ten decades. Here we are today entering our 150th birthday, and yet the Tribune’s young staff hasn’t printed more than a couple of paragraphs (if that) on the City’s Sesquicentennial. Maybe our broadcast media can do a better job?

  3. Mud
    March 17, 2006 at 11:03 pm

    Dave – I know this is a bit late, but you might want to review these two online articles.

    The first is: http://stateofthemedia.org/2006/
    I was wowed by this report.

    The second is a book review in the Economist. http://www.economist.com/books/displaystory.cfm?story_id=5601300
    The analogy, Blogging is to Journalism, as Home Brew is to Corporate Beer, is fun. Glen Reynolds might make a great phone interview, don’t you think?!

  4. Anonymous
    March 18, 2006 at 4:51 am

    Nobody reads the Santa Maria Times or their throw-away weeklies.

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