It's all over but the borrowing, I guess. Last week, rumor had it that a diverse body of investing types had submitted bids for Knight Ridder (NYSE: KRI), including private money and the likes of Gannett (NYSE: GCI).
Fulfilling earlier predictions, McClatchy (NYSE: MNI), operator of newspapers from Charlotte to Fresno to Anchorage, came in with $4.5 billion-ish bid. Its offer of $67.25 per share in cash and stock looks like it will take the prize. (Not that this turned out to be a very big contest.)
As I said on Friday, I wasn't sure that current Knight Ridder shareholders would see much of a boost, and the market came up with zilch today. Most of the good gain on Knight Ridder was rung up shortly after Private Capital Management, a subsidiary of Legg Mason (NYSE: LM), began stumping for a sale months ago.
This deal will have a lot of people scratching their heads. First of all, the $4.5 billion buyout -- with another $2 billion in debt to come -- has McClatchy trying to swallow an entity twice as large as itself. Last I checked, McClatchy didn't have billions in cash hanging around to give shareholders the nearly $3 billion in greenbacks promised to them. Of course, it didn't have much debt, either, but that will have to change. For its part, Wall Street doesn't seem too excited about the idea. McClatchy shares have dropped by 3% today.
The deal is also far from done. Reports indicate that McClatchy will shed around a dozen Knight Ridder properties, some out of pessimism for growth potential, and at least one, the St. Paul Pioneer Press, to avoid antitrust problems. (McClatchy owns the neighboring Minneapolis Star-Tribune.) Who's going to pick up the worst prospects in the Knight Ridder litter when the whole bunch brought so little interest? Good question.
Last Friday, I wondered, "What's a newspaper really worth these days?" I don't think we'll know the full answer for several more months.
Seth Jayson used to work in the newspaper biz, where a McClatchy editor had him photograph a jogging cat that did not, in fact, jog. He hopes incoming Knight-Ridder shooters are spared that kind of silliness. At the time of publication, he had no positions in any company mentioned here. View his stock holdings and Fool profile here. Fool rules are here.
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