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Investment groups meet Knight Ridder deadline

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Dec. 13--Knight Ridder Inc.'s "For Sale" sign has attracted some would-be buyers with fat wallets. But are they willing to give shareholders the reward some of them expect?

The San Jose, Calif., company, publisher of The Inquirer, Philadelphia Daily News, and 30 other newspapers, has drawn interest from investment groups that specialize in buying, restructuring and selling companies, according to people familiar with the process.

Shares of Knight Ridder, the nation's fourth-largest newspaper chain by sales, closed at $62.73 yesterday, up 2.4 percent -- more than Gannett Co., Tribune Co., or New York Times Co. -- as word spread that the company had attracted expressions of interest, despite previous concerns by analysts at Merrill Lynch & Co. Inc. and other Wall Street firms that bidders could be scarce.

But with no indication by Knight Ridder of how much the potential buyers were actually willing to pay, the stock stayed within the range where it has traded since Knight Ridder investors, led by Legg Mason Inc.'s Private Capital Management division, publicly demanded a sale last month.

Indeed, yesterday's price remained below the average $66 a share that Private Capital paid for its 19.8 percent stake in Knight Ridder, according to a protest letter that Private Capital manager Bruce Sherman sent last month to Knight Ridder chairman P. Anthony Ridder. Private Capital acquired about 4 million Knight Ridder shares in each of the last three years, at a time when other major investors were reducing their positions.

Private Capital is the nation's largest investor in publicly traded newspapers, which have lost much of their value in the face of rising newsprint and benefit costs and declining print circulation this year -- although they remain profitable.

A consortium including Blackstone Group L.P., of New York, Providence Equity Partners, of Rhode Island, and the New York firm Kohlberg Kravis Roberts & Co. met last Friday's deadline to express interest and seek additional information about buying Knight Ridder. Blackstone and Providence are diversified investors that have bought into newspapers before: They purchased a stake last year in Freedom Communications Inc., which owns dailies including California's Orange County Register.

Texas Pacific Group, of Fort Worth, Texas, also gave Knight Ridder notice it wanted a closer look. Texas Pacific has been a major investor in turnaround candidates, including airlines (Continental, America West), retailers (Burger King, Petco), and moviemaker Metro-Goldwyn-Mayer (MGM).

Last week, David Rubenstein, a cofounder of the Carlyle Group, of Washington, said that his firm also considered newspapers such as Knight Ridder's "attractive" at recent prices, but that he was not interested in going much higher. Yesterday, Carlyle officials declined to comment on whether the firm had made a formal expression of interest.

Officials at Knight Ridder also declined to talk about the bidders, potential sales prices, or the timetable for a possible sale.

Buyout firms sometimes hold companies for years, even decades, but more often they restructure the companies, selling off assets, cutting costs, or investing in business improvements, then selling the restructured company at a profit when the opportunity arises.

Executives at newspaper-operating companies such as the Gannett, McClatchy and Media General newspaper chains have also expressed interest in eventually acquiring Knight Ridder papers, but none has confirmed making a bid at this point.


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Copyright (c) 2005, The Philadelphia Inquirer

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