Merrill Lynch: Yesterday’s Deals ‘Net Positives’ for KR and Gannett

By: E&P Staff

Yesterday’s surprise announcement involving newspaper swaps in Detroit will likely be “net positives” for Gannett and Knight Ridder, two of the companies involved in the deal, according to a report issued by Merrill Lynch today.

The research firm is quick to point out that there is too little financial information to comment fully on the impact of the deals, but the report outlines some initial thoughts.

As far as Knight Ridder is concerned, Merrill feels “better” the company is out of the Detroit market. The Free Press was “more material to its financial results and less exposure to a choppy, large market should prove beneficial.”

Knight Ridder sold its interest in the Free Press to Gannett; the companies also swapped papers. Knight Ridder traded the Tallahassee (Fla.) Democrat for Gannett’s (Boise) Idaho Statesman, The Olympian, and The Bellingham Herald both in Washington. Gannett sold The Detroit News to the Media News Group.

There is limited upside to Knight Ridder’s newest additions, the report says, though top line growth will be steadier.

The research firm is less enthusiastic for Gannett because Detroit is a mature market. However, given it’s a good operator it will likely deliver results, the note said. The Tallahassee paper will be a nice fit for Gannett since it has TV and newspaper properties in Florida.

Merrill expects a “small boost ” to Knight Ridder’s revenue from the three additional newspapers. Likewise, Gannett could get a possible lift from the Florida acquisition, “given operating improvements” the company will make with the paper.

Merrill maintains its ?neutral? ratings for Knight Ridder and Gannett.

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