Ridder regrets sale of chain

He urged McClatchy to keep most papers

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March 16, 2006|By NEW YORK TIMES NEWS SERVICE

The chairman and chief executive of Knight Ridder Inc., P. Anthony Ridder, who sold the newspaper chain to the McClatchy Co. on Monday, said 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.

The sale will lead to the dissolution of the newspaper company that Ridder's family started in 1892, a prospect that he called depressing in a lengthy telephone interview.

"It's terrible," he said, "the whole thing," referring both to the sale of the company and the splitting off of the 12.

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. McClatchy's business philosophy has been to find papers in growth markets with no direct daily print competition.

With these papers separated from the entire 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 Sen. Vincent J. Fumo, a powerful Democrat from South Philadelphia, said Tuesday that he was seriously considering buying The Daily News. He had half-joked with The Daily News after the paper was put on the auction block in November, but said Tuesday that he was more serious and has lawyers and other investors looking into the possibility.

"If I were to become a major investor, I'd have to leave the Senate," 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," 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."

Ridder said that when he learned that Pruitt was selling 12 of the papers, he had asked him if he had any deals with others in advance to buy the papers, and Pruitt had told him no.

"Gary said no deals," Ridder said. "I asked him if he had talked to anybody, and he said he hadn't talked to anybody."

Ridder said that Pruitt told him that the 12 papers did not fit McClatchy's profile for growth markets. Pruitt said the same thing on Monday when he discussed the sale with investors and reporters.

In the interview, Ridder said he knew Pruitt planned to sell some of the 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 a week ago.

"That represents 45 percent of the company," Ridder said, referring to the amount of revenue the 12 papers brought Knight Ridder.

Learning of the decision to sell the 12 papers was the latest blow to Ridder, who found himself pressed in early November by large shareholders led by Bruce S. Sherman, head of Legg Mason Inc. subsidiary Private Capital Management in Naples, Fla., who wanted to put the newspaper chain up for sale.

Ridder said he thought that he had no choice but to sell. Sherman, who owns the biggest portion of Knight Ridder stock, was in a position to take control, Ridder said, by winning three seats on the company's 10-member board this year and four more seats next year.

So, Ridder said, he believed he could not turn down McClatchy's offer because he had no room to maneuver.

He said he knew he was going to lose control of his company anyway to three shareholders who had forced Knight Ridder to put itself on the market.

"So by '07, it would have been over," 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 Sherman would have prevailed by convincing other shareholders to sell the company in hopes of increasing the value of the stock.

If he had any regrets, 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.

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