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PHILADELPHIA - McClatchy Co. has agreed to sell Philadelphia's major daily newspapers and their Web sites to a group of local investors for $562 million, most of which will be borrowed from banks.
"We got it," said a jubilant Brian P. Tierney as he rushed through The Philadelphia Inquirer and Philadelphia Daily News lobby this afternoon to a meeting with publisher Joe Natoli. "We signed every line."
Tierney, a Philadelphia public relations and advertising executive who organized the local buyers, said that Philadelphia Media Holdings L.L.C. intended to be long-term owners. "Our plan is to invest in and grow both papers" and Philly.com, he said in a news release.
Union leaders said they look forward to meeting with the new owners in preparation for contract talks later this year.
"His enthusiasm is infectious," said John Laigaie, president of Teamsters Local 628, which represents Inquirer and Daily News truck drivers. "Enthusiasm is good."
A document sent to employees by publisher Natoli said that Philadelphia Media Holdings does not plan layoffs and will recognize existing labor unions. Employment at the papers has dropped from 4,000 in the mid-1980s to 2,800 last year.
The deal will return The Inquirer and Philadelphia Daily News to local private ownership for the first time since Walter H. Annenberg sold the papers to Knight Newspapers Inc. in 1969.
"I sincerely hope it will be a good deal for the papers," McClatchy CEO Gary Pruitt said in an interview. "I understand the concerns. I think it will be a good outcome."
In a statement he called it a "win-win deal" for McClatchy, the buyers and Philadelphia. He called it a "full, fair price."
Local ownership by a group with diversified business and political interests could cast the papers' editorial independence into doubt, some observers have worried.
"We are about to become a laboratory for local newspaper ownership that will be watched intently by others," publisher Natoli said in a note to employees.
The deal included $515 million in cash and $47 million in assumed pension liabilities.
The buyers include Tierney, who will be Philadelphia Media's chief executive; investor Bruce E. Toll, who owns auto dealerships and other businesses and will be the company's chairman; Leslie E. Brun, chief executive of Sarr Group, a holding company; Katharine D. Crothall, founder of Animas Corp., a medical device manufacturer recently sold to Johnson & Johnson; Bill Graham, chief executive of The Graham Co., a Philadelphia insurance brokerage; Michael Hagen, chairman and chief executive of NutriSystem Inc. in Horsham; Patricia Harron Imbesi, principal of Patriarch Media L.L.C. in North Wales; Aramark Corp. chairman Joseph Neubauer; and the Carpenters Pension & Annuity Fund of Philadelphia & Vicinity. These investors and others will provide up to $200 million of the price, according to an adviser to the group.
A group of bank lenders, headed by Royal Bank of Scotland, which owns Citizens Bank of Pennsylvania, will provide the rest of the funds.
The group made the most attractive bid, beating rival offers from private equity firms Avista Capital Partners, Onex Corp., and Yucaipa Cos.; and newspaper operators MediaNews Group and Daily News L.P.
McClatchy, of Sacramento, Calif., agreed in March to buy Inquirer and Daily News parent Knight Ridder Inc. for $4.5 billion plus $2 billion in assumed debt, but decided to sell 12 of Knight Ridder's 32 papers.
With the Philadelphia deal, which, according to a person familiar with the sale, involved the most troubled papers in Knight Ridder, McClatchy has sales agreements for six of the 12 papers.
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(Knight Ridder Newspapers correspondent Thomas Ginsberg contributed to this report.)
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(c) 2006, The Philadelphia Inquirer. Distributed by Knight Ridder/Tribune News Service.
