Thursday, March 16, 2006

More on the sale of Knight Ridder

I'm pissed that my paper, The Contra Costa Times, keeps getting labeled as a one of the "slow-growth" KR papers that McClatchy is compelled to sell. That's bullshit. We were one of four newspapers in the country that had a circulation gain last year and we are in the East Bay, one of the most vibrant economies in California.

Here's an article from the New York Times about how bad Tony Ridder feels (he can cry me a river on the golf course):

Knight Ridder Chief Expresses His Regrets Over Deal to Sell Newspapers
Published: March 15, 2006
The chairman and chief executive of Knight Ridder, P. Anthony Ridder, who sold the newspaper chain to the McClatchy Company on Monday, said last night that he resisted the sale and then sought to persuade McClatchy to keep most of the company's 32 papers.
But immediately after acquiring Knight Ridder for $4.5 billion, McClatchy and its company's chairman, Gary Pruitt, said they were putting 12 of the papers, nearly a third of them, back on the market.
"It's terrible," Mr. Ridder said, "the whole thing," referring to the sale and splitting off the papers.
"That represents 45 percent of the company," Mr. Ridder said, referring to the amount of revenue the 12 papers brought in.
The acquisition of the newspaper chain will lead to the dissolution of a company that Mr. Ridder's family started in 1892, a prospect that he called depressing in a telephone interview last night.
The newspapers to be sold are profitable, but in difficult, slow-growth markets. They include The Inquirer and The Daily News in Philadelphia, The San Jose Mercury News and The Beacon Journal in Akron, Ohio.
With these papers separated from rest of the Knight Ridder package, they are starting to attract interest from numerous potential buyers, many of them local to each market.
In Philadelphia, for example, State Senator Vincent J. Fumo, a powerful Democrat from South Philadelphia, said that he was seriously considering buying The Daily News. He had half-joked with The Daily News about a purchase in November, but said yesterday that he was more serious and that he has lawyers and other investors looking into the possibility.
"If I were to become a major investor, I'd have to leave the Senate," Mr. Fumo said, "but I don't know if I'd play that major a role."
"It depends on the return on investment," but he said he believed the paper to have a profit margin of at least 12 percent.
Zachary Stalberg, who until last year had been the editor of The Daily News for 20 years, said he thought there was a sudden seriousness by investors for a number of the Knight Ridder papers.
"Certainly the mood has shifted," Mr. Stalberg said. "While Knight Ridder seemed to be weighing a sale and waiting for bidders, there was a lot of talk about the dying newspaper business. But then when suddenly the local papers are on the market, people begin to play with the idea much more seriously."
Mr. Ridder said that when he learned Mr. Pruitt was selling 12 of the papers, he had asked him if he had any deals with others in advance to buy them.
"Gary said no deals," Mr. Ridder said referring to Mr. Pruitt. "I asked him if he had talked to anybody, and he said he hadn't talked to anybody."
Mr. Ridder said that Mr. Pruitt told him the 12 papers did not fit McClatchy's business profile of finding papers in growth markets with no direct daily print competition.
Mr. Pruitt, who could not be reached for comment last night, said the same thing on Monday when he discussed the sale with investors and reporters. He also said he expected the 12 papers to sell quickly.
In the interview, Mr. Ridder said he knew Mr. Pruitt planned to sell some papers but thought it might be less than half a dozen. He said he was stunned when he heard the number from his investment bankers on Thursday night.
Learning of that decision was the latest blow to Mr. Ridder, who found himself pressed in early November by large shareholders, led by Bruce S. Sherman, who wanted the board to put the newspaper chain up for sale.
Mr. Ridder said he thought that he had no choice but to sell. Mr. Sherman, a founder of Private Capital Management who owned the biggest portion of Knight Ridder stock, was in a position to take control, Mr. Ridder said, by winning 3 seats on the company's 10-member board this year and 4 more seats next year.
So, Mr. Ridder said, he believed he could not turn down McClatchy's offer because he had no room to maneuver. He knew that he would eventually lose control of the company.
"So by '07, it would have been over," Mr. Ridder said. "If I thought there was any way to avoid this outcome, if I thought we could win the election on the three directors, I absolutely would have done that. But there was not a single board member, not a single adviser, who said, You have a chance to win this election."
He said his advisers were certain Mr. Sherman would have prevailed by persuading other shareholders to sell the company in hopes of increasing the value of the stock.
If he had any regrets, Mr. Ridder said, it was that in 1974, when the Knight and Ridder companies merged, long before he was on the board, the previous managers had not created two classes of stock, which would have made it less vulnerable to a takeover.
"If you wanted to be listed on the New York Stock Exchange, you had to have one class of stock," he said. "If you're willing to go on the American exchange, you can have two classes. They decided they owned so much of this company, there was no way that anyone else could take it over."
As it happened, there was, and Mr. Ridder said he has been living with that prospect for almost a year, when Mr. Sherman and two others first contacted him. In the end, Mr. Ridder said, the hardest part was learning that the chain would be broken up.
Mr. Ridder and Mr. Pruitt met face to face in New York on Saturday, where they had both flown to sign the deal. For about two hours in the offices of one of Knight Ridder's law firms, they talked about the sale.
"The first thing he said was, 'Tony, I know how unhappy you are, but there's nothing I can do about it; the board has decided this,' " Mr. Ridder said. "I said, 'Gary, I am extremely disappointed.' "
Mr. Ridder said he had no choice but to learn to accept the outcome. So he used that time to negotiate retirement benefits for Knight Ridder employees, although many they may lose those when the papers are sold.
He said his own multimillion-dollar severance package and those of other top executives had already been set. He is to get three times his current salary of $1.7 million plus stock options, which he said were "well south of $10 million" because he did not own 100 percent of the value of his shares.

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