Knight Ridder is currently exploring a possible sale or other steps to lift the value of its shares. It's not clear what bids were submitted.
NEW YORK — Newspaper publisher Knight Ridder Inc. didn’t make a presentation at two widely attended conferences for media investors this week, but there was no shortage of talk and speculation there about the company’s future.
Knight Ridder, under heavy pressure from its largest shareholders, is currently exploring a possible sale or other steps to lift the value of its shares, and initial bids were due Friday. It’s not clear what bids were submitted, and the company declined to make any comment.
Despite the company’s absence, participants at the annual meetings, which were sponsored by the UBS and CSFB brokerage houses, were abuzz with talk about the potential outcomes for the San Jose, Calif.-based publisher, whose stable of 32 newspapers includes The Miami Herald and the San Jose Mercury News.
John Miller, a portfolio manager with the Chicago-based investment firm Ariel Capital Management LLC, said Knight Ridder was “a topic of discussion at nearly every presentation I was part of.”
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The intrigue over Knight Ridder’s fate has been mounting since last month, when the company agreed to explore the possibility of a sale, in line with a demand from its largest shareholder, the Naples, Fla.-based investment firm Private Capital Management LP.
At the conference, however, there were more questions than answers about who might wind up making a play for Knight Ridder, which is the second-largest newspaper publisher in the country after Gannett Co., publisher of the top-selling daily USA Today.
Gannett is seen by some analysts as the most logical potential buyer for Knight Ridder among newspaper companies, but CEO Craig Dubow would only say at the conference that the company would take a “hard look” at any potential acquisition opportunities.
Tribune Co., owner of the Chicago Tribune, the Los Angeles Times and several other major newspapers, indicated that it was not actively involved in the Knight Ridder process, and it’s not clear what the intentions of McClatchy Co., a smaller but well-regarded newspaper publisher, might be. Private equity investors are also believed to be interested, as is William Dean Singleton, CEO of the privately held newspaper publisher MediaNews Group Inc.
Doug Arthur, an industry analyst with Morgan Stanley, said in a recent research note to investors that considerable costs savings could still be made at Knight Ridder, boosting its potential appeal to a buyer, but he noted that the market’s reaction so far to the sale process has been “highly skeptical.”
Newspaper stocks have been beaten down this year as investor sentiment turned sharply against the industry. The main reasons are an increasing shift of readers and advertising dollars to the Internet, long-term declines in circulation, rising costs for newsprint and employee benefits, the consolidation of key advertisers in retail and telecommunications and a poor year at the box office, which has dampened demand for advertising from movie studios.
Some publishers could be interested in certain Knight Ridder properties but not necessarily the entire company. However, selling off pieces of the company separately could have serious tax consequences, says tax and accounting expert Robert Willens of Lehman Bros., since those sales would likely trigger taxes calculated from a very low cost base in the case of newspapers that have been held for a long time. Buying the company whole wouldn’t trigger those taxes, he said.
In the midst of all this turbulence, Knight Ridder Chairman and CEO Tony Ridder, a fourth-generation member of the Ridder newspaper family, sought to reassure his employees in a holiday season message last week. The demands from the shareholders to explore a sale, he said, have “left us all in a state of uncertainty, and I regret that.”
Unlike most other newspaper companies, Knight Ridder has a single class of stock with equal voting rights for all shareholders, making it more vulnerable to shareholder pressure than publishers like The New York Times Co. and The Washington Post Co., whose shareholder vote is controlled by the founding families. Gannett and Tribune also have one-class share structures.