By: Jennifer Saba
As the Newspaper Association of America’s annual convention gets underway today in Chicago, a lot of buzz naturally surrounds McClatchy’s stunning run at Knight Ridder and the 12 papers again up for auction.
Yet despite the news last week that Moody’s Investors Service slashed McClatchy’s rating, on top of speculation that interest in the 12 papers has been mixed, McClatchy’s CEO Gary Pruitt seemed relaxed and confident that his company will execute the latest acquisition just like past deals.
“We are pleased with the process,” he told E&P in the lobby of the Swiss?tel – a stone’s throw away from NAA headquarters at the Fairmont and the site of the Associated Press board meeting. “I feel very gratified in the amount of interest in the divestitures. So we’re quite confident that will be concluded successfully and we will be able to focus on those papers we are retaining.”
The only party that has publicly stepped forward to declare that it made an aggressive and competitive bid on all 12 properties was Yucaipa Companies, the worker-friendly private equity firm working with the Newspaper Guild. Last week, the Guild said that McClatchy was making it difficult for certain parties to get full financial information about the 12 papers.
Pruitt declined to comment on the specifics of the process and the Guild’s charge but did say the goal is to act in the best interest of McClatchy. “That is what we must do and that is what we will do,” he said. “That involves many factors including price, deal structure, certainty of closing, speed of closing, interest of shareholders, interest of employees, interest of the communities–and no one factor trumps all others. I know that there are times when the interests of potential buyers and sellers may be at odds.”
Nor is Pruitt deterred that Moody’s cut McClatchy’s debt ratings or that the stock has been trading down since the announcement of the deal.
“We knew it was likely we would be downgraded as a result of this deal because we are taking on more debt,” Pruitt explained. “So that doesn’t surprise us. We fully anticipate we will remain investment grade.” He added that McClatchy’s credit rating was lower than its current status when the company bought The Star Tribune in Minneapolis.
Contrary to what many believe, McClatchy did not broach potential buyers for the 12 papers before executives inked the Knight Ridder deal. “As rumors circulated that we were a bidder for Knight Ridder we did have companies contact us,” Pruitt said. “They contacted us even before we had submitted a bid,” he said, adding the discussion about selling the dozen papers only kicked off for real when the deal was announced.