McClatchy Sells 5 of 6 Remaining KR [Knight Ridder] Papers

AKRON, Ohio Jun 7, 2006 (AP)— McClatchy Co. said Wednesday that it has reached agreements to sell five of the six remaining Knight Ridder newspapers it plans to divest for about $450 million.

The newspapers are the Akron Beacon Journal in Ohio; the Duluth News Tribune in Minnesota; Grand Forks Herald in North Dakota; The Fort Wayne News-Sentinel in Indiana and the American News in Aberdeen, S.D.

That leaves the Times Leader of Wilkes-Barre, Pa., remaining to be sold. McClatchy has already announced the sale of six other larger newspapers owned by Knight Ridder Inc., including The Philadelphia Inquirer.

McClatchy said in March that it planned to buy Knight Ridder for $4.5 billion plus the assumption of about $2 billion in debt, but said it planned to keep only 20 of Knight Ridder's 32 newspapers, selling the other 12. Most didn't fit McClatchy's criteria of being located in growing markets.

It's Official: McClatchy Sells 5 KR Papers -- To 4 Companies
Gary Pruitt

By Jennifer Saba

Published: June 07, 2006 5:10 PM ET

NEW YORK McClatchy Co. announced late this afternoon it has found buyers for five Knight Ridder papers now in its hands, resulting in a total sale of $450 million.

This is how it breaks down:

--The Akron (Ohio) Beacon Journal is going to Sound Publishing Holdings, a wholly owned subsidiary of Black Press, a Canadian company which produces over 100 publications in British Columbia, Alberta, Washington State and Hawaii.

--Forum Communications will buy The News Tribune in Duluth, Minn., and the Grand Forks (N.D.) Herald. Forum is a media firm based in Fargo, North Dakota. The company owns a number of newspapers in North Dakota, South Dakota, Minnesota, and Wisconsin, including The Forum of Fargo-Moorhead (N.D.).

--Ogden Newspapers is purchasing The News-Sentinel in Fort Wayne, Ind., which is under a joint operating agreement. Ogden, a private family-owned company headquartered in Wheeling (WV), publishes 39 daily newspapers, as well as related web sites, telephone directories, weekly newspapers, shoppers, and magazines in 15 states.

--Schurz Communications agreed to acquire the American News in Aberdeen, S.D. Schurz publishes 12 daily and six weekly newspapers in medium and small markets with a combined circulation of nearly 225,000. It also owns four television stations, seven radio stations, two cable companies, phone directories, shopping guides, and a printing company.

"We are pleased with the full, fair prices we will receive, and pleased that we were able to execute on these sales as we promised," Gary Pruitt, CEO of McClatchy, said in a statement. "Some skeptics doubted us on both counts, but these deals reaffirm the underlying strength of the newspaper business, and the soundness of our plan for acquiring Knight Ridder."

McClatchy has found willing buyers for 11 of the 12 Knight Ridder papers it plans to divest when it completes the acquisition of Knight Ridder slated to close at the beginning of July.

The Times Leader in Wilkes-Barre, Pa., is still on the auction block. McClatchy expects to announce a buyer for that paper in the upcoming weeks.

The sale of the 11 newspapers will bring total consideration of slightly more than $2 billion, including cash proceeds of $1.935 billion.

Dirks, Van Essen & Murray, a newspaper merger-and-acquisition firm based in Santa Fe, New Mexico, represented McClatchy in the transactions involving the five newspapers announced today.

The closing of each of the divestiture transactions is conditioned upon the closing of McClatchy's acquisition of Knight Ridder. That could happen as soon as June 27, following a planned Knight Ridder shareholders vote on June 26. Most of other transactions are expected to close shortly following that closing.

"Our aim throughout the divestiture process was to find the right buyers for the right newspapers," said Pruitt in a statement.

Referring to the largest paper sold, he added: "We believe that Black Press Ltd. and the Akron Beacon Journal are a great fit."

"Under the direction of the Knight family and Knight Ridder, the Akron Beacon Journal has been a good community newspaper for a long time. We believe in the same focus on local journalism of high quality," said Black Press Ltd. CEO David Black.

William C. Marcil, president and CEO of Forum Communications, said in a statement: “The Duluth News Tribune and the Grand Forks Herald are each great newspapers with a strong heritage of committed journalism. They will fit well within our diverse group of integrated media properties, which are united by our shared mission of serving the public trust.”

Commenting on the Fort Wayne deal, Ogden CEO Robert M. Nutting said in a release, "We're very pleased to have been selected by McClatchy to continue the tradition of the Pulitzer Prize-winning News-Sentinel. As a family company we're especially pleased to be associated in the Fort Wayne JOA with another long-standing newspaper family. The Inskeep family and the Fort Wayne newspapers are obviously cornerstones of northeast Indiana and we're proud to become partners in this venture. Here in the Ohio Valley where my great-grandfather started his first newspaper we publish one morning and two separate afternoon papers, so we know and understand the benefits of the dynamic of a community served by multiple newspaper voices."

Looking at the overall deal, Pruitt said: "The prices we're receiving for these 11 newspapers are certainly within the range we expected." Net after-tax proceeds of approximately $1.4 billion from the sales will immediately be applied to pay down debt incurred in the purchase of Knight Ridder's 32 newspapers.

"We bought the Knight Ridder papers for a multiple of about 9.5 times their 2005 cash flow; these 11 newspapers taken together will bring us 11.1 times the trailing 12-month cash flows through April," Pruitt said.

Jennifer Saba (letters@editorandpublisher.com)

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