By: Jennifer Saba
Several factors went into the decision to let MediaNews Group acquire four Knight Ridder papers from McClatchy — price and timing played a role but also the fact that MediaNews already operates several newspapers.
?We try to evaluate factors like price, certainty of closing, timing of the deal and we were glad it was a strategic partner as opposed to a [financial one],? Howard Weaver, McClatchy?s vice president of news, told E&P on Friday.
On Wednesday, McClatchy announced that MediaNews plans to acquire three California papers, the San Jose Mercury News, The Monterey County Herald, and Contra Costa Times, as well as the St. Paul (Minn.) Pioneer Press for $1 billion (with a little help from Hearst Corp.).
Weaver said that no one factor ?trumps the other? in the auction process and that McClatchy is entertaining as many potential bidders as possible for the remaining eight papers. ?The more bidders the better, we?re agnostic about that,? he said.
When asked if MediaNews plans to go after any of the remaining Knight Ridder orphans, such as those in Philadelphia, Weaver said: ?We are not commenting on specific bidders.?
Also called into question is whether MediaNews will run into regulatory issues since, according to the Newspaper Guild, the company already owns 43 Bay Area dailies.
Additionally, the complex deal involves financial backing from Hearst, which owns the San Francisco Chronicle. Hearst plans to acquire the Pioneer Press and the Monterey County Herald and then sell them to MediaNews in exchange for equity in the Denver-based company?s non- Bay Area assets.
Weaver said that they feel comfortable that the deal won?t hit any legal obstacles: ?Both MediaNews and McClatchy have gotten some of the best legal advice we could get on antitrust issues.?
The $1 billion price tag MediaNews is willing to pay represents a multiple of 11.5 times EBITDA — well above the multiple of roughly 9.5 times EBITDA McClatchy paid for Knight Ridder.
In general, sellers tend to get a higher multiple with strategic bidders. Interested newspaper companies can cut costs by reducing corporate overhead while financial bidders tend to keep the corporate structure intact giving them less room to shave costs.