Private Equity Interest Reportedly Waning in KR As Deadline Looms

By: E&P Staff At least a handful of private equity firms said they would not drive up the price in a Knight Ridder auction.

Two private equity consortiums -- Kohlberg Kravis & Co., Blackstone Group, and Providence Equity Partners in addition to Bain Capital, Hellman & Friedman, Thomas H. Lee Partners, and Texas Pacific Group -- will probably not make offers above Knight Ridder's current stock price, according to a story in the Los Angeles Times. As of this morning, Knight Ridder was trading at $62.37.

Neither the private equity firms nor Knight Ridder commented on the matter to the paper.

The Los Angeles Times did say that strategic companies are still interested in Knight Ridder including McClatchy, MediaNews Group, and Gannett. Morgan Stanley analyst Doug Arthur told the Times that if the MediaNews Group and Gannett jointly buy Knight Ridder, Gannett would likely take on the smaller papers.

Bids for the San Jose, Calif., newspaper chain are due March 9 though there has been recent speculation it will take longer to come to any conclusion. In a note issued last week, Merrill Lynch analysts expressed doubt that a mid-March deadline exists.

If Knight Ridder's board finds the bids unacceptable, a potential sale could be scrapped. Instead, Knight Ridder could implement a massive share repurchasing program or it could buy some shareholders out.

Knight Ridder has repeatedly said it will not break up the company, most likely due to huge capital gains taxes, sources say.

In perhaps a harbinger of the Knight Ridder outcome, on February 17, Daily Mail and General Trust pulled its Northcliffe newspaper group off the market due to lackluster bids. Gannett was reportedly interested in the Northcliffe properties.