McClatchy Ponders Knight Ridder, Gannett Only 'Interested Observers'

By: E&P Staff McClatchy is the latest name to pop up as a potential Knight Ridder bidder, the San Jose (Calif.) Mercury News reported today.

Along with a trio of private equity firms -- the Blackstone Group, Providence Equity Partners, and Kohlberg Kravis Roberts -- McClatchy is also considering the acquisition of the San Jose-based newspaper chain, a source close to McClatchy told the Mercury News.

If McClatchy puts its hat in the ring -- the first round of bids are due Dec. 9 -- the company would most likely have to seek out a financial partner. McClatchy is a mid-sized company with a market capitalization of about $3 billion, while Knight Ridder is currently valued at about $4 billion. Morgan Stanley analyst Douglas Arthur wrote in a report released earlier this week that the deal with McClatchy is "unlikely but not totally out of the question."

McClatchy's last major acquisition in 1997 was a $1.4 billion transaction for Cowles Media, the former owner of the Star Tribune in Minneapolis.

But McClatchy's ownership of the Star Tribune likely would make it impossible for the company to acquire the Pioneer Press and either merge the two papers or shut one down, experts told the Pioneer Press for a story in that paper Friday. That would violate antitrust laws, said law professor Daniel Gifford, an antitrust expert at the University of Minnesota.

"It would be very difficult to impossible to justify combining two newspapers into one newspaper when those papers are essentially the principal newspapers in the market," Gifford told the Pi Press.

Still, newspaper analyst John Morton told the Mercury News that any interest by McClatchy would probably be good news for Knight Ridder newspapers and employees. "That would be the best of all possible worlds for everyone who works for Knight Ridder,'' Morton said. "They have a strong journalistic tradition and it's still closely held by the family. They wouldn't come in and wreck the place.''

The Mercury News also reported today that at the moment, Gannett is not making a move for Knight Ridder. Karen Hastie Williams, a Gannett board member, told the Mercury News that "at this point, we're simply interested observers."