Knight Ridder Vote on McClatchy Deal Will Be June 26, Here Are 'Risks'

By: Jennifer Saba In the excitement and wheeling and dealing that followed the big deal, what is often forgotten that Knight Ridder shareholders still must approve the sale of the company to the McClatchy Co. After some delays, Knight Ridder announced today through a lengthy proxy filing with the U.S. Securities and Exchange Commission (SEC) that its annual meeting of shareholders is to take place in San Jose, Calif. on June 26.

The biggest issue dominating the agenda is the proposed acquisition of Knight Ridder by McClatchy ? and 80% of Knight Ridder shareholders must approve the transaction.

If the measure goes through, Knight Ridder shareholders will receive $40 cash and 0.5118 of a share of McClatchy?s Class A common stock. The value comes to $67.25 per share based on McClatchy?s closing price on March 10, the last business day before the public announcement was made on March 12.

The board of directors at Knight Ridder unanimously recommend to shareholders to vote for the acquisition. If not enough votes are sufficient to approve the merger, Knight Ridder recommends postponing the shareholder meeting.

Assuming the deal is approved, two Knight Ridder directors will be appointed to McClatchy?s board.

Besides all the "pros" of the deal, there are several risks listed in the proxy statement involving the proposed deal:

--McClatchy might not divest all of the 12 properties and ?may not achieve the anticipated benefits of the merger,? said the document. The 12 orphan papers are anticipated to fetch $2.1 billion with an anticipated $635 million to be paid in income taxes.

--The uncertainty surrounding the merger may adversely affect employees at the two companies and the ability to attract and retain key management.

--State attorneys, private parties, or regulatory agencies could challenge the deal on antitrust issues.

--Knight Ridder shareholders that receive McClatchy stock will have reduced voting rights. McClatchy has a dual-class stock structure and McClatchy?s Class B shareholders have 10 times the voting power.

--The price of newsprint can affect future earnings.

--Competition and customer consolidation may affect the combined company?s business.

--The circulation declines affecting the industry could impact ad revenue.