KNIGHT RIDDER AUCTION, TO INDUSTRY’S RELIEF, GETS BIDS

Along With Private Equity Players Are Gannett, McClatchy and MediaNews

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NEW YORK (AdAge.com) -- The bumper crop of potential bidders for Knight Ridder that have emerged can be interpreted two ways: either newspaper companies are more attractive investments than many had assumed, or the newspaper companies among the bidders see such limited growth ahead that acquisitions are the only way to notably boost revenue.

A surprising array of likely bidders -- at least five -- seem to have expressed initial interest in buying Knight Ridder or made bids by the Dec. 9 deadline to weigh in.

Likely suitors
Likely suitors for Knight Ridder, the country’s second-largest newspaper company by circulation, include Gannett Co.; the McClatchy Cos.; MediaNews; Blackstone, Providence Equity and Kohlberg Kravis Roberts in a joint bid; and Texas Pacific Group, Thomas H. Lee Partners, Madison Dearborn Partners and Spectrum Equity Partners, either in tandem or separately. The potential bidders’ names surfaced in news reports in The San Jose Mercury News (a Knight Ridder paper in California), Los Angeles Times and Bloomberg.

Only some of those possible suitors had surfaced in the speculation that erupted after Knight Ridder’s largest shareholder, Private Capital Management, demanded a sale on Nov. 1, citing “limited growth across the newspaper industry," “continuing consolidation among the traditional sources of print advertising revenue” and “the redirection of advertising dollars to other media.”

Despite that compelling sales pitch from Private Capital, Wall Street last month repeatedly suggested that bidders would be harder to find than increases in paid newspaper circulation.

Limited options
Merrill Lynch analyst Lauren Rich Fine told Advertising Age in November that Gannett and Tribune seemed to be the only potential contenders to buy all of Knight Ridder, although McClatchy could perhaps engineer a merger to complement its existing portfolio.

Just last week, Ms. Fine wrote, “We are increasingly of the view that there are few bidders for the whole company and those that are interested are not likely to bid much above the current trading price.”

Chad Atkins, general counsel, Private Capital Management, declined to comment on the latest developments. “As a general rule we comment only through our filings,” he said. Polk Laffoon, a Knight Ridder spokesman, did not respond to a message left seeking comment by deadline.

Slate's suggestion
On a (hopefully) less serious note, Slate media critic Jack Shafer suggested last week that a less conventional buyer should take a look. “I suggest the Central Intelligence Agency purchase the 32-newspaper chain,” he wrote. The acquisition would complement the new Open Source Center at the CIA, established last month to follow unclassified data, Mr. Shafer wrote.

“The company has a stellar reputation because -- unlike the CIA -- it has never toppled a foreign government, attempted to poison a foreign leader, or doped an unsuspecting U.S. citizen with LSD to see how he would react. As long as the agency keeps its newspaper operations separate from its clandestine work, we shouldn’t expect to lose more than five or six reporters to hostile forces each year. It sounds bad, but under current market conditions, it’s a better deal than a buyout.”

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