Knight Ridder, the nation's second-largest newspaper chain whose holdings include 49. 5 percent of The Seattle Times Co., said Monday it is...

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Knight Ridder, the nation’s second-largest newspaper chain whose holdings include 49.5 percent of The Seattle Times Co., said Monday it is exploring the possibility of selling the San Jose, Calif.-based company.

Knight Ridder’s board is under pressure to sell from three large shareholders who together own about 37 percent of the company. The three, Private Capital Management, Southeastern Asset Management and Harris Associates, have all indicated they favor a sale of the company, whose stock price has dropped sharply this year.

In a statement Monday, Knight Ridder said its board was exploring “strategic alternatives to enhance shareholder value,” a term often meaning a company is putting itself up for sale.

Any decision is not expected to have an immediate impact on Seattle’s long-standing legal dispute over the joint-operating agreement (JOA) between The Times and The Hearst Corp., owner of the Seattle Post-Intelligencer.

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Newspaper-industry analysts have speculated that potential buyers for Knight Ridder include Gannett, the largest U.S. newspaper publisher, or Tribune Co., owner of the Chicago Tribune, Los Angeles Times and Baltimore Sun.

Denver billionaire Phil Anschutz, who bought San Francisco’s The Examiner in 2004 and started a free paper in the Washington, D.C., area earlier this year, was also named a potential buyer by Merrill Lynch analyst Lauren Rich Fine.

Knight Ridder did not return a request for comment Monday. Its statement said it planned no additional comment until its board makes a decision.

Jill Mackie, a Seattle Times spokeswoman, said her company had no immediate comment other than that Times officials are following developments.

“We don’t see a scenario under which different ownership of Knight Ridder’s share of The Times would make a difference in the management of The Times,” Mackie said.

Beyond its Times holdings, Knight Ridder owns 32 papers, including The Miami Herald and The Philadelphia Inquirer. In Washington state, it recently acquired The Olympian and The Bellingham Herald.

Bloomberg Financial Service placed the company’s market value at $4.23 billion on Monday. Some analysts have suggested the company would be better off sold in pieces than as a whole.

But whether a potential deal involves all or parts, The Times holding could prove irksome to Knight Ridder’s plans.

Knight Ridder has owned its Times stake since Herman Ridder bought it in 1928 for $1.5 million during a period when the Seattle paper had financial problems. Today, in addition to its 49.5 percent share of The Times’ voting stock, Knight Ridder owns 65 percent of the nonvoting preferred, dividend-paying stock.

According to court documents in the JOA fight, The Times Co. board has capped dividend payouts to its shareholders in recent years at $6 million annually, limiting Knight Ridder’s payout under the corporate structure to $4 million.

But newspaper brokers estimate The Seattle Times newspaper alone could be worth $900 million, making the size of payouts seem minuscule and a source of irritation to Knight Ridder executives.

Asked in an interview two years ago why his company doesn’t sell its Times stake, Knight Ridder Chief Executive Tony Ridder said, “We’d consider it, but we don’t have any control over the Times board. Who would buy something like that?”

Deutsche Bank Securities media analyst Paul Ginocchio said Monday it’s difficult to sell a minority stake, “particularly with a dividend tax.”

“Knight Ridder’s going to want the full economic value of its 65 percent Times [dividend-paying] stake,” Ginocchio said. “But anyone who wants to buy it will only want to pay the dividend value. It’s going to be very difficult.”

Philip Meyer, author of “The Vanishing Newspaper,” which looks in part at Knight Ridder’s impact on newspaper economics, agreed if the company were sold in parts, its Times stake could present a problem.

Meyer, a former Knight Ridder executive who is now the Knight Professor of Journalism at the University of North Carolina, said the company could end up with no buyer for its Times stake.

“Maybe they could put it on eBay,” he said.

Whatever Knight Ridder decides, it is not likely to immediately affect the JOA fight.

Under JOA rules, any change in minority ownership of The Times does not require Hearst’s approval, although Justice Department antitrust officials may have to approve a deal.

New York-based Hearst has said it plans to continue its legal fight to block The Times from moving to end or amend the JOA. Hearst has said it can’t operate the P-I outside the JOA.

Attorneys familiar with the JOA dispute said Monday that both sides are negotiating terms of a renewed court fight and that no settlement of the overall case is under discussion.

A Hearst spokesman declined to comment on Knight Ridder’s situation Monday.

Bill Richards is a freelance writer hired on a special contract by The Seattle Times to cover events involving the joint-operating agreement with the Seattle Post-Intelligencer. He can be reached at brichards@seattletimes.com.