Gannett Play for KR Could Hinge on U.K. Newspaper Sale

By: Jennifer Saba Whether or not Gannett makes a bid for Knight Ridder may hinge on a set of newspaper properties across the pond, according to a Bear Stearns report. This country's largest newspaper company is reportedly making a play for the Northcliffe group of regional newspapers in the United Kingdom.

That bid is expected to be worth about $2.6 billion. The Knight Ridder deal is expected to be roughly $6.4 billion.

"We would not be surprised to see a decision on the Northcliffe sale ahead of Knight Ridder bids," said the report. "We can envision a scenario in which if Gannett bids on Northcliffe but losses, Gannett could still remain active in the Knight Ridder process." Gannett is rumored to be teaming up with MediaNews Group in the Knight Ridder auction.

Likewise if Gannett wins the U.K. properties, the research firm could see Gannett dropping its interest in Knight Ridder.

Meanwhile, the report puts a pencil to help wanted advertising and notes that online help wanted has been the key factor to the category's recovery. Recruitment advertising suffered a beating in 2001-2003 after coming off a 10-year peak in 2000. During 2001-2003, the category pulled in $4.9 billion and represented 10.6% of total newspaper ad revenue compared with $9.2 billion and 19% of total ad revenue in 2000.

During the peak year of 2000, online help wanted ad revenue represented only 6% of the total category. Bear Stearns estimates that in 2005, online revenue was $1.9 billion and represented 27% of the total category.

"We applaud the newspaper publishers for having a very solid foot in this segment," said the report. The research firm forecasts that newspapers garnered 51% of all online help wanted ad revenue in 2005, up from an estimated 47% in 2003.

Still, the report cautions that increased competition from the likes of Google Base, Craigslist, and others can threaten easy growth. "We believe growth in online classified will continue to be a bright spot for the newspaper industry in 2006 but longer-term worry that growth is cannibalizing the print product and doesn't always end up in the pocket of their online counterparts."