A union bid to buy nine newspapers owned by Knight Ridder Inc. is apparently a nonstarter because the chain says it will only consider offers for the entire company.
San Jose's Knight Ridder said last month that it is exploring "strategic alternatives,'' including the possible sale of its 32 news-papers. Major investors in Knight Ridder stock who are critical of the company's management have pushed the company to consider a sale.
Last week, the Newspaper Guild, which represents advertising, circulation and editorial workers, said it had retained two advisory firms as part of a possible bid for the properties, which include the San Jose Mercury News and the Monterey Herald.
The Guild also wants to buy the Philadelphia Inquirer, Philadelphia Daily News, St. Paul (Minn.) Pioneer Press, Akron (Ohio) Beacon Journal, Duluth (Minn.) News Tribune, Lexington (Ky.) Herald-Leader and the Grand Forks (N.D.) Herald.
Guild president Linda Foley said in an interview that the union guild is considering a "worker-friendly'' buyout of the nine newspapers that would include employee involvement in the purchase. The bulk of the money would come from other investors.
Foley said that earlier this month, officials at Goldman Sachs, Knight Ridder's investment bank, had told her the union's bid for nine newspapers would be unacceptable but that she made the idea public nonetheless.
"We are reaching out on a number of levels and hope they entertain our bid,'' Foley said.
Knight Ridder spokesman Polk Laffoon said, "There is no interest here in selling the company piecemeal. Knight Ridder is for sale, to the extent it is for sale, as a whole and not as a piecemeal thing.''
John Morton, a newspaper analyst in Maryland, said that Knight Ridder would have a large capital gains tax burden if it sold the company in pieces.
Examples of employees taking big ownership stakes in newspapers, either directly or through Employee Stock Ownership Plans, are rare. Such a plan is a type of defined-contribution pension benefit plan in the United States that holds company stock. The Guild has not said whether it would use direct employee ownership or an employee stock ownership structure in a bid.
The only newspapers in the country with pure employee stock ownership plans are the Dubuque Telegraph Herald and the Cedar Rapids Gazette, both in Iowa, said Corey Rosen, executive director of the nonprofit National Center for Employee Ownership in Oakland.
The first such plan in any industry was at Peninsula Newspapers Inc. in Palo Alto. In 1956, economist Louis Kelso developed the plan as a leveraged buyout to enable employees of the newspaper group holding the Palo Alto Times, the Redwood City Tribune and Valley Journal in Sunnyvale to buy the company from its founders.
The Palo Alto plan lasted until January 1978, when Peninsula Newspapers was sold to the Tribune Company of Chicago. The next year, the Times and Tribune merged to become the Peninsula Times Tribune, which folded in 1993. Two other newspapers, the Peoria Journal Star and the Kansas City Star, were once held through employee stock plans, Rosen said, but abandoned the practice.
There are also employee-owned newspapers without a formal employee stock ownership structure. The Omaha World-Herald has been owned by its workers since 1976, editor Larry King said. The theory is employees have an investment interest in the product, "and it is a way to retain some employees,'' he said.
E-mail George Raine at graine@sfchronicle.com.
