Monday, March 13, 2006

Extra! Extra! -- Newspaper Giant Swallowed

The news is out: Knight Ridder (KRI) has been sold to McClatchy Company for $4.5 billion in cash and stock.

According to the NY Times, the deal will be announced later today and it will consist of about 60% cash and the rest in stock. This deal would value KRI at $66.93. The stock closed at $65.00 on Friday, up almost 4% in anticipation of the deal, which was widely thought to be announced this weekend. Volume was manic on Friday, with over 3.4 million shares traded, compared to a normal daily average of just 731k shares traded.

Knight Ridder is the nation's second-largest newspaper publisher based on circulation. It publishes 31 daily newspapers in 28 U.S. markets, with over 9M daily readers. While revenues are off and internal growth stinks, the paper still spits out terrific cash flow and keeps debt manageable.

We're surprised by the news: we were thinking that Gannett (GCI), with its more refined balance sheet (EBIT/interest expense ratio = 15x) and juggernaut USA Today paper, was the one who was going to swoop in for the kill. It's not a strech to say that McClatchy would've been better off exercising a stock buyback and giving a much needed "ummpth" to shares.

In any event, expect more newspaper deal flow: newspapers' market share of total advertising revenue dollars has fallen each year since 1997. In such a challenging environment, it's either growth through acquisition or an early trip to the morgue.

About Us | In the News | Management | Contact Us | Archive | Premium Membership | Terms of Use | Privacy Policy | Careers | FAQ

All quotes are 15 minutes delayed. Copyright © 2006 by Catablast! Media Group LLC, part of the SeekingAlpha network. Web Design by Synexio Systems. All Rights Reserved.