By: E&P Staff
E&P reported first today that MediaNews group, with the Hearst Corp., will purchase four of the 12 Knight Ridder papers that McClatchy Co. is shedding from its recent deal to purchase Knight Ridder.
Shortly before 6 p.m. ET, the deal was announced via PR Newswire. Here is the release.
The McClatchy Company today announced a definitive agreement with MediaNews Group, Inc. of Denver, CO and Hearst Corporation of New York City under which the companies will pay McClatchy $1.0 billion in cash to acquire four newspapers. MediaNews will purchase two northern California papers, the San Jose Mercury News and Contra Costa Times, and Hearst will acquire the Monterey (CA) Herald, and the St. Paul Pioneer Press in St. Paul, Minnesota.
Under a separate agreement between Hearst and MediaNews, Hearst has agreed to contribute the St. Paul Pioneer Press and Monterey Herald to MediaNews in return for an equity investment in the non-San Francisco Bay Area assets of MediaNews, subject to, among other things, regulatory approval.
In the event such transaction is not consummated, MediaNews has agreed to acquire these newspapers from Hearst. The four newspapers are currently owned by Knight-Ridder, Inc., which McClatchy agreed last month to acquire. The parties intend to close the transaction as promptly as possible after the close of McClatchy’s Knight Ridder acquisition, which is expected this summer.
The purchase price represents a multiple of approximately 11.5 times
2005 EBITDA of the acquired newspapers, McClatchy reported.
MediaNews intends to contribute the San Jose Mercury News and Contra Costa Times to California Newspapers Partnership, owned 54.23% by MediaNews. Gannett and Stephens Media, the remaining partners, have committed to contribute their share of the purchase price. MediaNews will fund its share of the purchase price from bank borrowings, which have been committed by Bank of America.
“Finding the right home for these papers has been a high priority for
us since the announcement that we would be selling 12 of the Knight Ridder newspapers,” said Gary Pruitt, Chief Executive Officer of McClatchy. “This transaction highlights our ability to deliver quickly on our divestiture plan, and we are delighted with the sales price. 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.”
“We are delighted to acquire these fine newspapers and expand our reach in California as well as enter a new and growing market in St. Paul,” said Dean Singleton, Chief Executive Officer of MediaNews. “These were the newspapers that excited us the most about Knight Ridder, and we are pleased to have the opportunity to acquire them from McClatchy.
“Given the growth characteristics of these newspapers and the favorable tax benefits from the asset treatment of the purchase, we believe this transaction represents a wonderful opportunity at a fair price,” added Singleton.
After giving effect to the transactions, MediaNews will become the nation’s fourth largest newspaper company in terms of daily circulation (approximately 2.7 million daily and 3.0 million Sunday), with 53 daily newspapers. McClatchy will be the second largest, behind Gannett.
McClatchy will continue to market the other eight papers it plans to
divest and has received significant interest in all of the publications
from potential bidders around the country. The remaining eight papers are the Philadelphia Daily News; The Philadelphia Inquirer; Akron Beacon Journal (OH); Aberdeen American News (SD); Duluth News Tribune (MN); The Fort-Wayne News-Sentinel (IN); Grand Forks Herald (ND); and The Wilkes-Barre Times Leader (PA). McClatchy expects to make announcements regarding ownership of some or all of these papers by the close of the Knight Ridder acquisition this summer.
“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,” Mr. Pruitt said. “We made this deal because it offered the opportunity to achieve a good price and a timely deal, and it represents a big step toward achieving certainty for these papers and for McClatchy and its shareholders.”