NEW YORK: One of Knight Ridder's major shareholders, Southeastern Asset Management, notified the Securities and Exchange Commission (SEC) that it wants to open discussions with the company about a potential sale.
Southeastern, based in Memphis, Tenn., filed a SC 13D form relating to 6,585,800 shares of Knight Ridder common stock, constituting 8.9% of the 73,664,308 shares outstanding.
Southeastern made the move in response to Private Capital Management's (PCM) Nov. 1 letter to Knight Ridder board members calling for the sale of the company. According to the filing, "Southeastern would like the flexibility to discuss PCM's recommendation with management, other shareholders and any other parties Southeastern deems necessary to fulfill its fiduciary duty to its clients to help ensure that the company's intrinsic value gets recognized."
Meanwhile, an article in Thursday's Wall Street Journal suggested that Knight Ridder "appears amenable to discussing the possibility" of a breakup.
It also said that conventional wisdom holds that Gannett "might be a good suitor for Knight Ridder" or perhaps "a consortium of private-equity investors is more likely."
But the WSJ also raises the tantalizing prospect that new media companies with local designs -- including Yahoo, Google or eBay -- might be interested. Yahoo "has moved increasingly into original content and would like to develop its local reach. Meanwhile, Google Inc. has expressed interest in entering the classified-ad market, where newspapers have deep relationships and continue to play a dominant role." Knight Ridder is part owner of CareerBuilder Inc., the online classified Web site.
Morgan Stanley analyst Douglas Arthur told WSJ: "You're potentially opening up a Pandora's box in the [leveraged buyout] world, and the debate rages on about what these things are worth. ... I think they're cheap; most people don't." He figures the situation will "test" the value of local media, where newspapers still dominate: "The gauntlet has been thrown down."
The article concludes that pieces of Knight Ridder might attract different buyers. Gannett might consider Kentucky's Lexington Herald-Leader, which would complement its papers in Louisville, Ky., Cincinnati, and Indianapolis. McClatchy, based in Sacramento, might like the nearby Contra Costa Times, and so on.
