The deal -- announced this afternoon -- marks the second time in three months that the Philadelphia Inquirer and the Philadelphia Daily News have changed hands. The two papers were acquired as part of Sacramento-based McClatchy Cos.' $4.5 billion acquisition of Knight-Ridder in March, but McClatchy immediately signaled its intent to shop Knight-Ridder titles in slower-growing markets like Philly and the San Francisco Bay Area. And the Philadelphia titles were among the least profitable in Knight-Ridder's empire.
The deal calls for Mr. Tierney's investor group, Philadelphia Media Holdings, to pay McClatchy $515 million in cash, and to assume $47 million in pension liabilities. Earlier published reports said McClatchy was looking for between $500 million and $600 million.
'Good deal all around'
"That price is more than we expected, so that's great for McClatchy because they wanted to get rid of them," said Benchmark Global Partners Analyst Edward J. Atorino. "But those are good papers, too, and private investors don't have the same pressures [as public companies], so I'd say it's a good deal all around."
The deal turns PMH into a major media presence in Philadelphia, the nation's No. 4 media market. In addition to the 705,965-circulation Inquirer (No. 8 nationwide) and the 123,483-circulation Daily News (No. 98), the group also gets the papers' joint Web site, Philly.com. Last year, the cluster generated nearly as much national advertising revenue ($97 million) as the entire pre-merger McClatchy chain ($100 million).
The group's new leader, Mr. Tierney, has deep ties to the advertising community. He founded the PR and advertising firm Tierney Communications, grew it to $275 million in annual billings and sold it to the Interpublic Group of Cos. in 2002. Mr. Tierney is no longer affiliated with the firm.
"On behalf of the dedicated local investors who have joined together, this is a day of immense pride and heartfelt excitement," Mr. Tierney said in a statement. "We intend to be long-term owners committed to serving the region with the vigorous, high-quality journalism we all expect of the Philadelphia Inquirer, Philadelphia Daily News and Philly.com. Our plan is to invest in and grow both papers, not allow them to erode."
In a statement, McClatchy CEO Gary Pruitt said: "We are delighted to receive a full, fair price consistent with our projections, and further gratified about the buyer's commitment to the community." McClatchy has now sold six of the 12 slow-growth papers it said it intended to sell in March. In April it sold the San Jose Mercury News, Contra Costa Times, Monterey Herald and St. Paul Pioneer Press to MediaNews Group Inc. for $1 billion.
Remaining on the block are: the Akron Beacon Journal in Ohio; Aberdeen American News in South Dakota; Duluth News Tribune in Minnesota; The Fort-Wayne News-Sentinel in Indiana; Grand Forks Herald in North Dakota; and The Wilkes-Barre Times Leader in Pennsylvania.