Fraters Libertas

Knight Ridder Is Selling (maybe), But Who's Buying?

From today's WSJ:

A potential sale of Knight Ridder Inc. might be the first shoe to drop in the long-talked-about consolidation of the newspaper industry.

If so, somebody better deliver the news to prospective buyers. There don't seem to be many out there, at this point.

Knight Ridder's biggest shareholder, Legg Mason Inc.'s Private Capital Management LP, this week called for the sale of the San Jose, Calif., company, the nation's second-largest publisher of daily newspapers by total circulation, behind Gannett Co. In a letter to the company's board, PCM Chief Executive Bruce Sherman said that Knight Ridder has determined that its breakup value far exceeds its stock price, and that directors should "aggressively pursue the competitive sale of the company." PCM owns a 19% stake in the company.

We could see more of the same old thing:

Conventional wisdom holds that Gannett, the largest newspaper company, might be a good suitor for Knight Ridder. Others think a consortium of private-equity investors is more likely, since newspapers are considered cheap, but remain good cash-flow vehicles that would help finance a leveraged buyout.

Or a whole new player in the field:

Some think a new-media company such as Yahoo Inc. or eBay Inc. might be interested.

Yahoo owning KR would certainly shake things up. I imagine that at least we might finally see a halfway decent web offering from the Pioneer Press. And the internet giant might not have to overpay:

It is difficult to determine what price Knight Ridder might fetch, either in whole or in pieces. A reasonable valuation range for newspaper companies is between 11 and 13 times earnings before interest, taxes, depreciation and amortization. That would put Knight Ridder's price in a range of $70 to $100 a share. But few observers expect the company to fetch that much, given the dim outlook for the industry and Knight Ridder in particular.