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PHILADELPHIA - Investors willing to pay billions for Knight Ridder's chain of daily newspapers and Web sites have until Dec. 9 to put together their initial bids, according to people familiar with the process.
Blackstone Group of New York is part of a coalition of private-equity investors that is considering submitting an initial bid to Knight Ridder Inc.'s advisers, a member of the group said Thursday.
Investment bankers at Goldman Sachs and Morgan Stanley have been helping Knight Ridder explore what the company calls "strategic alternatives" since last month. That came after the company's largest shareholders, led by Legg Mason Inc.'s Private Capital Management, called on chairman P. Anthony Ridder to sell the company so they could boost the value of their investments at a time when newspaper shares have been caught in a downturn.
The New York buyout firm Kohlberg Kravis Roberts has also been looking at Knight Ridder, The Wall Street Journal reported Thursday. KKR officials would not comment. Knight Ridder spokesman Polk Laffoon IV also declined to comment on any aspects of the bidding for the company.
In a report to investors earlier this week, an analyst at Morgan Stanley said Knight Ridder, which has 32 daily newspapers in 29 markets, could be worth $75 a share. But Wall Street remains skeptical, with Knight Ridder shares closing Thursday at $60.93, up 53 cents, on the New York Stock Exchange. At that price, Knight Ridder is worth $4.1 billion.
Analysts differ as to whether the company could fetch more than that in a sale to another chain or private investors, or whether it would be better off borrowing money, buying back shares and paying the dissidents to go away.
Either way, the company faces pressure to boost advertising sales or cut employment and other expenses.
Blackstone joined Rhode Island-based Providence Equity Partners last year in purchasing 40 percent of family-controlled Freedom Communications for $467 million. Freedom operates 28 daily newspapers, including its flagship Orange County Register in California, along with a small chain of broadcast stations. Its yearly sales are around $800 million, compared to Knight Ridder's $3 billion.
In the months following the Blackstone and Providence investment, Freedom's advertising and circulation revenue rose, Moody's Investor Services wrote in a report last April.
The deal was one of several newspaper transactions last year that inspired some investors to believe they could get rich by buying more newspaper stocks and reselling them to private buyers.
Private Capital Management, of Naples, Fla., is now the largest investor in Gannett Co. Inc. as well as Knight Ridder and several smaller chains.
Unlike most newspaper companies, Knight Ridder is not controlled by a single family and is more vulnerable to pressure from outside investors like Private Capital Management.
Buyout firms like Blackstone, Providence and Kohlberg Kravis Roberts specialize in buying troubled or out-of-favor companies in a variety of industries. They sometimes extensively reorganize companies, cut costs, sell assets and try to resell them at higher prices; other times they make comparatively few changes, and hold on until market conditions improve so they can sell at a profit.
A person familiar with Blackstone said the firm and its partners have not decided on final plans for Knight Ridder but is considering the likelihood it could be resold, in whole or in part, to other newspaper chains or private investors, in the years to come.
(c) 2005, The Philadelphia Inquirer. Distributed by Knight Ridder/Tribune News Service.