By: E&P Staff
n the kind of complicated three-way deal that William Dean Singleton?s MediaNews Group seems always in the middle of these days, The McClatchy Company confirmed Wednesday evening that it is selling off for $1 billion four of the dozen ?orphan? dailies it acquired in its big Knight Ridder purchase.
News of the deal for the San Jose Mercury News, two other California dailies and the St. Paul (Minn.) Pioneer Press had been bruited about in industry circles all day Wednesday, but there were still some surprises in the official announcement.
McClatchy said MediaNews will purchase the two northern California papers, the Mercury News and Contra Costa Times, while Hearst will acquire the nearby Monterey Herald, and the Pioneer Press.
In a separate agreement between Hearst and MediaNews, Hearst ?has agreed to contribute? the Herald and Pioneer Press ?in return for an equity investment in the non San Francisco Bay Area assets of MediaNews,? the announcement from the three chains said.
If that deal is tripped up by regulatory problems or is otherwise not consumated, the announcement said, MediaNews will buy the papers from Hearst.
MediaNews intends to do some ?contributing? of its own. It said it will contribute the Mercury News and Contra Costa paper to California Newspapers Partnership, in which MediaNews has a 54.23% stake. The two other partners–Gannett Co. and Stephens Media–have committed to contribute shares of the purchase price, MediaNews said.
MediaNews said it is funding its own shrare from bank borrowings, and has commitments from the Bank of America.
McClatchy said the purchase price for all papers amounts to about 11.5 times 2005 EBITDA (earnings before interest, taxes, depreciation and amortization)–a healthy multiple.
“This transaction highlights our ability to deliver quickly on our divestiture plan, and we are delighted with the sales price,? McClatchy CEO Gary Pruitt said in a statement. ?The 11.5 times multiple–which is two full turns higher than the 9.5 times multiple we paid for the whole of Knight Ridder–demonstrates that these are strong newspapers with great value to companies whose strategies fit them.”
MediaNews CEO Singleton said the four papers were the onces ?that excited us most? and would allow the chain to extend its reach in California, where it publishes many papers, including the Oakland Tribune.
With the purchase, Singleton noted, MediaNews will become the nation?s fourth-largest newspaper publisher in terms of circulation, with 53 dailies totalling about 2.7 million daily circulation.
Pruitt said there was ?intense interest? in the remaining eight papers, and that he was confident that all or most of them would be sold by the time the Knight Ridder deal closes this summer.
The remaining eight papers are the Philadelphia Daily News; The Philadelphia Inquirer; Akron Beacon Journal; Aberdeen (S.D.) American News; Duluth (Minn.) News Tribune; The Fort Wayne (Ind.) News-Sentinel; Grand Forks (N.D.) Herald; and The Wilkes-Barre (Pa.) Times Leader.
“We are doing exactly what we said we would do when we announced our planned divestitures: end uncertainty for these newspapers and their employees and let new owners start building their futures as quickly as possible,” Pruitt said.