Cites 'Limited Growth Across Newspaper Industry'

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NEW YORK ( -- If you hadn’t noticed the funeral pyre already being built for print newspapers, consider the extra kindling added just yesterday.
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The largest shareholder in the country’s second-largest newspaper publisher, Knight Ridder, urged the company’s sale because of “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.”

If the Knight Ridder board does not comply, the shareholder said, perhaps another board should be installed.

Holds 19% stake
The shareholder, Private Capital Management, fired its broadside in a letter yesterday addressed to company board members and filed with the Securities and Exchange Commission. The Naples, Fla., investment adviser, led by Chairman-CEO Bruce S. Sherman, holds about 19% of Knight Ridder’s shares.

Knight Ridder owns prominent papers like the Miami Herald and the Philadelphia Inquirer, a chain of 30 more dailies and more than 50 non-daily newspapers. Its daily circulation tops 3 million and its revenue last year totaled more that $3 billion. Knight Ridder Digital, its online operation, manages 34 local newspaper sites and operates Real Cities, a network of 110 city and regional Web sites. Knight Ridder also jointly owns with the Tribune Co. and Gannett Co. classified Web sites such as CareerBuilder, and But those online investments, while growing, have not grown fast enough to help the company avoid belt tightening moves in the last few years.

A Knight Ridder spokeswoman declined to comment.

Not pleasing to Wall Street
Like many of its competitors, the company has struggled to increase its stock price through increased efficiencies, asset sales, strategic acquisitions and stock buyback programs. And like most newspaper operators, it still has not pleased Wall Street.

Knight Ridder’s stock price fell to $54.27 at the market's close Oct. 28 from $66.94 on Jan. 3, a nearly 19% decline. Then Private Capital Management’s letter yesterday jolted the stock to a $58 close after opening at $53.07.

But it remains far from clear who might want to buy the company if it were put up for sale, as a whole or in parts.

No obvious buyers
In a note to investors today, Merrill Lynch analyst Lauren Rich Fine said obvious buyers for Knight Ridder -- or any large newspaper company -- hardly spring to mind.

“Potential returns from the acquisitions of newspaper companies are not that interesting, leading us to believe that private equity interest in the group may not be as large as some investors have long expected,” Ms. Fine wrote. “However, we admit that we could be bringing in a negative bias to the analysis, given our sober long-term views on the industry.”

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