McClatchy: 12 'Orphans' Likely to Go to Different Parents

By: The bloc of 12 newspapers being sold by the McClatchy Co. as part of its acquisition of Knight Ridder Inc. will likely be broken up and bought by several buyers, McClatchy said Tuesday.

Elaine Lintecum, a spokeswoman for McClatchy, which owns the Star-Tribune of Minneapolis, said there has been strong interest in the papers by several parties, although she declined to name them.

"It's not likely to be one transaction," she said. "It's not likely to be 12 transactions. It's somewhere in between."

Last week, McClatchy agreed to pay $4.5 billion in cash and stock to acquire San Jose, Calif.-based Knight Ridder, the parent of The Philadelphia Inquirer, the Philadelphia Daily News, and the St. Paul Pioneer Press.

The deal gives Sacramento, Calif.-based McClatchy 32 newspapers. Of those, 12 will be sold, including the two Philadelphia dailies and the Times Leader in Wilkes-Barre.

The papers are being jettisoned because they're in slower growing markets.

Analysts have cited industry leader Gannett Co. in McLean, Va., as a possible buyer, as well as MediaNews Group Inc., a privately held newspaper company based in Denver and run by William Dean Singleton. The Newspaper Guild, backed by financier Ron Burkle, also announced its interest.

John Morton, president of Morton Research Inc., a media consulting company in Silver Spring, Md., said the logical buyers for most of the dailies would be publishing companies in nearby areas. That's because a publisher that owns several newspapers becomes more attractive to advertisers, who only need to deal with one company and get exposure to several cities.

"Most newspapers like to cluster ownership," said Morton, who also writes a column about the newspaper industry for the American Journalism Review.

By buying nearby papers, Morton said, a publisher can boost ad revenue and cut costs by consolidating administration and publishing functions. Antitrust issues shouldn't be a problem if the two publications aren't in the same city or adjacent communities.

Morton said it makes sense for MediaNews to buy the San Jose Mercury News and The Monterey County Herald, both in Northern California, since it owns a slew of newspapers in the East Bay.

Singleton also recently visited the Inquirer, fueling speculation that he might buy the paper.

The owner of The Plain Dealer in Cleveland, Advance Publications in New York, could be interested in the Akron Beacon Journal.

Gannett could take a look at The News-Sentinel in Fort Wayne, Ind., since it owns The Indianapolis Star and a paper in Muncie, Ind. Gannett also might be a bidder for the Philadelphia papers, since it's shown interest in entering big markets in recent years.

As for the Newspaper Guild and Burkle's Yucaipa Cos. in Los Angeles, Morton said unions that have talked about buying papers on the block often couldn't get financing.

The Guild is different because the union has Burkle's backing. But Morton notes that it's unusual for outside equity investors to get into the newspaper industry. One scenario is that the investor will flip the property after about five years, once it gets a good return.

But it might be tough to find a buyer for the Times Leader in Wilkes-Barre, because it has competition in the same community - The Citizens' Voice.

"A competitive newspaper always has lower profit margins and always will, as long as there's another newspaper in the market," Morton said.