Business Journalists Address Major Questions That Accompany Knight Ridder Sale

By Kevin Sweeney
March 14, 2006 03:52 PM

The $4.5 billion takeover of Knight Ridder by The McClatchy Co. brings as many questions as it does answers for the 32 affected newspapers.

McClatchy also announced that it was selling off 12 of the papers to alleviate some of the $2 billion debt it would assume with the deal. Business coverage varied depending on if the hometown paper was being further divested or if it was staying under the McClatchy umbrella.

Christina Hoag, a reporter with The Miami Herald (which will stay with McClatchy), says that the perception of the deal varies among those inside and outside the company.

"Analysts are much more pessimistic in general about the future of newspapers and are emphasizing that McClatchy may not have such an easy go of it (circulation wise) as they have historically had," Hoag says.

She says that the Miami Herald Media Co., Knight Ridder and McClatchy are all much more bullish about the deal than analysts. Hoag has consulted SEC documents and analyst reports to provide the numbers in her coverage.

At The Mercury News in San Jose, reporters provided a behind-the-scenes look at the deal's caveat to unload the dozen publications, including their own. McClatchy says that these organizations do not fall in line with its profitability and market growth goals.

"McClatchy's plans to sell so many papers, however, came as a surprise to the Knight Ridder board, which learned the details only over the weekend as it met to consider the sale," according to Chris O'Brien and Pete Carey of the Mercury News. "Knight Ridder publishers first heard the plan on a conference call with Ridder at 6:30 a.m. Monday."

Speculation at the Mercury News and the 11 other papers on the block turned to who might take over their newspapers. For the others, coverage touched on the vast market share the deal would have for their new owner.

"The purchase will vault the 149-year-old company from the nation's 10th-largest newspaper publisher to No. 2 as ranked by circulation," writes Jim Fuquay in the Fort Worth Star-Telegram . "Its 32 dailies will have a combined daily circulation of more than 3.2 million, about 20,000 employees and just over $2.8 billion in annual revenue."

McClatchy's market share in the Carolinas has also received quite a boost. Consolidation of some of the heavyweight newspapers in North and South Carolina gives McClatchy a dominating presence.

"If the sale of Knight Ridder goes as expected, McClatchy will acquire The Charlotte Observer as well as The State in Columbia, South Carolina's largest newspaper, and The Sun News in Myrtle Beach, one of the fastest-growing markets in the country," according to Scott Dodd of The Charlotte Observer.

"They'll join McClatchy's current papers, The News & Observer in Raleigh - North Carolina's second-largest - as well as publications in Rock Hill , Hilton Head and Beaufort , S.C. "

Perhaps the newspaper in the most tenuous position is the Pioneer Press in St. Paul , Minn. McClatchy owns the cross-town rival Star Tribune and the fate of the Pioneer Press lies in the balance.

"The initial deal brought concerns locally that McClatchy could shut down the Pioneer Press. Now the focus turns to who might be interested in buying the paper in a hotly contested newspaper market," report John Welbes and Jennifer Bjorhus in the Pioneer Press.

"In the Pioneer Press' case, McClatchy foresaw a problem with antitrust laws, which it felt likely would have prevented dual ownership of the Pioneer Press and Star Tribune in the Twin Cities market."

In the coming months, the financial well-being of newspapers will be closely watched. The level of interest shown in these papers still up for sale - and the price tag that comes along with that interest - will go a long way toward signaling the strength of the entire newspaper industry.

"The story is radically different according to market. I think the challenge is to maintain a balance," Hoag says. "The sale of the 12 papers doesn't spell disaster for those papers or the newspaper industry or their communities. Neither does the McClatchy purchase of the 20 papers mean that there won't be painful transitions, belt-tightening or even failure down the road.

"The challenges the newspaper industry faces still exist and by no means does McClatchy have the silver bullet to solve them. This is really another step in the evolution of the newspaper industry."

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