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Published June 7, 2006 at 9:45 AM
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 McClatchy Co. said June 7 it has agreed to sell five midwestern newspapers to different bidders for roughly $450 million and days later, the last one on the block went to a consortium of HM Capital Partners and its former publisher.
The twelve put up for bidding in connection with its Knight Ridder acquisition reaped more than $2 billion and mark a significant dismantling of a one-time old media force.
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KNIGHT RIDDER AUCTION: TAKE TWO
Bidding wrapped up Tuesday, May 16 for the twelve McClatchy papers on the block since its $6.5 billion acquisition of Knight Ridder in March. The first winner, which took the two Philly papers, came Tuesday, May 23 and the collective dozen sold drew hefty price tags.
- Before the Wilkes-Barre
Times-Leader went to the HM Capital group and the McClatchy-Knight Ridder deal wrapped up, the last significant chunk all went, all to media companies, include:
- Duluth News Tribune and the Grand Forks Herald, which are based in Duluth, Minn., and Grand Forks, N.D. to Fargo, N.D.-based Forum Communications Co.;
- The News-Sentinel of Fort Wayne, Ind. to Wheeling, W. Va.-based Ogden Newspapers Inc.;
- Akron Ohio's Akron Beacon Journal to Sound Publishing Holdings Inc., a unit of Victoria, British Columbia-based Black Press Ltd.;
- American News, of Aberdeen, S.D. to South Bend, Ind.-based Shurz Communications Inc.
- On May 23, McClatchy Co. agreed to unhand its two Philadelphia mastheads to a group of home-town bidders for $562 million, rebuffing (among others) William Dean Singleton of MediaNews Group for local boys, advertising executive Brian Tierney and Bruce Toll, co-founder of luxury home builder Toll Brothers Inc.
- In March, Toll told The Deal that they wanted to keep the Philly papers Philly-owned (i.e. in publication, safe from folding). Published reports said McClatchy wouldn't go for it and would likely only consider bids from big media, but it seems $562 million was enough to sway the vote. In a statement, McClatchy's chief executive Gary Pruitt said the company was certain the papers remaining on the block would draw enough to reach their $2 billion projection for all 12 papers.
- In April, a complicated, billion-dollar deal gave MediaNews Group Inc. and Hearst Corp. control of four formerly KR, now McClatchy Co. mastheads -- San Jose Mercury News and Contra Costa Times for MediaNews, and the Monterey Herald and St. Paul Pioneer Press for Hearst. In a side deal, Hearst will swap the Herald and Pioneer Press to MediaNews, in exchange for a stake in the unit that owns the company's newspapers outside the San Francisco area. The buyers are paying 11.5 times Ebitda.
- The paper remaining on the block is the northeast Pennsylvania-based Wilkes-Barre Times Leader.
- Meanwhile, the Department of Justice issued a second request for information on McClatchy's Knight Ridder plan centered around the Minneapolis-St. Paul market. But McClatchy executives downplayed the move, citing plans to divest the Pioneer Press, saying it ensured competition would remain strong.
THE REAL STORY
As the future of newspapers hangs in the balance and old-media companies struggle with how to balance losing money in print editions with how to draw advertising dollars rapidly moving to the Web, dealwatchers ponder the future of newsprint.
- In the case of the Knight Ridder broadsheets, other bidders to declare interest but haven't yet walked away with a deal --or who have been the poor victims of the deal-rumor mill--include The Newspaper Guild-Communications Workers of America, fueled by private equity firm Yucaipa Cos.; Gannett Co., which publishes the country's best-selling daily, USA Today. Their reasons for bidding vary: to turn ownership over to union employees who could see an industry downturn like those in airlines and automotives, but could better control their fates, unlike the United Auto Workers, for example; or to expand their massive newspaper holdings.
- Other original contenders for the Philadelphia dailies, sources told Reuters last Tuesday, included Canadian publisher Black Press Ltd.--which has come away with Ohio's Akron Beacon Journal--alongside Canadian buyout shop Onex Corp. and MediaNews. Texas investor Christopher M. Harte and his team, which includes Avista Capital Partners, also submitted an offer for the pair, according to the Inquirer itself. New York Daily News owner Mort Zucherman was also thought to have put forth an offer.
GOING TO THE SOURCE
- In case anyone wasn't paying attention to how their trusted news source was covering the auction, Knight Ridder made sure its own pubs did, sparing no expense to write about itself.
| Dealwatch executive summary |
The Date |
The Action |
| 6.26.06 |
McClatchy announces successfully selling its last paper on the block and tying up its Knight-Ridder purchase. |
| 6.14.06 |
McClatchy says the DOJ has extended its review of the sale of two California papers to MediaNews Group Inc. |
| 6.07.06 |
McClatchy unhands five more papers for $450 million. |
| 5.23.06 |
McClatchy announces plans to unhand its Philadelphia papers to the home town bidders. |
| 5.23.06 |
McClatchy says it is confident the remaining six papers will help bring the total amount drawn for all 12 to $2 billion. |
| 5.17.06 |
MediaNews posts $3.6 million in losses, attributing it to a softer ad market and high expenses. |
| 5.16.06 |
The Philadelphia Enquirer reports on the progress of its auction. |
| 5.16.06 |
Final bids are due for the eight McClatchy papers on the block. |
| 5.01.06 |
The McClatchy auction leads dealmakers to ponder the future of newsprint. |
| 4.26.06 |
Meanwhile, Department of Justice issues a second request for information on the McClatchy-Knight Ridder deal. |
| 4.26.06 |
MediaNews Group Inc. and Hearst Corp. take four McClatchy papers in a deal worth $1 billion. (See related Deal memo) |
| 3.10.06 |
The day after the original Knight Ridder auction ends, dealwatchers anticipate news of a winner. |
| 1.2006 |
PE firms team up to make a Knight Ridder bid. |
Source: The Deal |
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