By: E&P Staff The McClatchy Company of Sacramento, CA and Knight-Ridder, Inc. of San Jose, CA today announced they have signed a definitive agreement under which McClatchy will acquire Knight Ridder in a transaction valued at $67.25 per share consisting of $40.00 in cash and a fixed fraction
of .5118 of a Class A McClatchy share. The transaction values Knight Ridder at approximately $6.5 billion, including approximately $2.0 billion in assumed debt at closing.
The expanded McClatchy Company will have 32 daily newspapers and approximately 50 non-dailies after the planned sale of 12 Knight Ridder papers. McClatchy's dailies will then have a combined daily circulation of about 3.2 million, making it the nation's second largest newspaper company measured by daily circulation.
McClatchy stated that it would have had 2005 pro forma revenues of $2.83 billion and combined pro forma EBITDA of $754 million assuming full year ownership of all retained papers, after planned divestitures which contribute $219 million of EBITDA, and before cost synergies.
As a result, McClatchy will own leading newspapers in many of the fastest growing markets. Papers to be added through this transaction include the Miami Herald, Kansas City Star, Fort Worth Star-Telegram and Charlotte Observer. They will join McClatchy's 12 papers serving cities like Minneapolis, MN; Sacramento, CA; and Raleigh, NC. In addition, McClatchy combined with Knight Ridder will have an expanded network of valuable internet assets including the national Real Cities network, a one-third stake in the leading jobs site CareerBuilder, and other attractive interactive businesses.
"Opportunities like this come perhaps once in a company's lifetime, and we're thrilled to have this chance to extend McClatchy journalism and our proven newspaper operations to 20 high-quality newspapers, in high-growth
markets," said Gary Pruitt, Chairman and Chief Executive Officer of McClatchy.
"Our two companies operate in the finest traditions of American journalism, devoted to independent, public interest reporting and the highest ethical values. Combining the two creates a company particularly well-positioned to lead the way in a changing media landscape. It's truly a chance for McClatchy to do more of what it does best."
The Knight Ridder papers to be retained are a good geographic fit with McClatchy's current portfolio, generally located in regions where McClatchy has deep history and experience. Once integrated, the new McClatchy will operate the leading local media companies in 30 of the country's premium growth markets, each generally employing the market's largest news staff and largest sales force, and enjoying the leading online presence and the largest share of local advertising.
Knight Ridder Chairman and CEO Tony Ridder said, "Knight Ridder and McClatchy share many similar -- and important -- values, most notably a commitment to quality journalism, fairness to our employees and service to our communities.
"The joining of so many Knight Ridder newspapers under
McClatchy's banner will enable them to continue to flourish in an environment of excellence and integrity. This transaction, which represents an excellent outcome for shareholders, also concludes a period of considerable uncertainty for many of Knight Ridder's valued and dedicated employees, and I thank them for their perseverance through it. For the 12 newspapers that will be sold, the uncertainty is not over and I regret that very much."
Pruitt added: "This deal is a vote of confidence in the newspaper industry as well as our mission-driven commitment to public interest journalism. We strongly believe that good journalism is good business, but that
doesn't mean business as usual. We have the opportunity to apply tested, successful management in some of the most promising markets in the country. Although audiences get news in many new ways today, the appetite for
independent, useful information is greater than ever, and the opportunities for a news company that meets these needs is unlimited."
As part of the transaction, McClatchy intends to divest 12 Knight Ridder newspapers, mainly located in cities that do not fit the company's longstanding acquisition criteria, chiefly involving growing markets. The largest are the Philadelphia Inquirer and San Jose Mercury News.
Others include Knight Ridder's other Philadelphia paper, the Daily News; Akron Beacon Journal (OH); Wilkes Barre Times Leader (PA); Aberdeen American News (SD);
Grand Forks Herald (ND); Ft. Wayne News - Sentinel (IN); Contra Costa Times (CA); Monterey Herald (CA); and Duluth News Tribune (MN). The St. Paul Pioneer
Press (MN) is to be sold due to anticipated anti-trust concerns involving McClatchy's (Minneapolis) Star Tribune.
"These are terrific publications but simply do not fit with our long-standing acquisition and operating strategies," said Mr. Pruitt.
The transaction is subject to approval by the Knight Ridder
shareholders and is expected to close in three to four months.
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