Private Equity Firm to Bid on 12 Newspapers

Ron Burkle's firm will bid on a dozen former Knight Ridder papers. (Bob Riha Jr - AP)

The Yucaipa Cos., a Los Angeles-based private equity investment firm, plans to bid Tuesday for the 12 Knight Ridder Inc. newspapers put up for sale by McClatchy Co.

Yucaipa would not say how much it intends to offer for the papers, including the Philadelphia Inquirer, the San Jose Mercury News and the Akron Beacon Journal.

The papers became available after McClatchy last week bought the Knight Ridder chain of 32 papers and announced it would divest itself of 12 dailies in what it said were slower-growth markets.

Robert Hall, a Yucaipa adviser and former publisher of the Inquirer and Philadelphia Daily News, said the firm would make its bid Tuesday, when preliminary offers are due. He added that, if successful, the private fund would take a long-term approach to its investment, freeing the papers from having to meet the pressures of Wall Street.

"Philosophically, Yucaipa has been a worker-friendly fund, a patient investor that will allow for a lesser return than maybe another investor looking for a five-year flip," Hall said. "It would give the papers the opportunity to reinvent themselves to grow in their markets."

Other bidders are possible. Analysts expect Gannett Co., the nation's largest newspaper publisher, to submit offers for at least some of the dailies. Gannett would not comment on its plans but its top executives, speaking in New York yesterday, indicated the company was studying the situation.

Gannett's president and chief executive, Craig A. Dubow, said in a presentation to a New York gathering of media analysts that the company had taken a hard look at the possibility of bidding for the entire Knight Ridder chain but decided to step back. "The others coming to market, we're going to take a look at those," he said, referring to the 12 papers for sale.

But because of its large number of holdings, Gannett's purchasing plans are complicated by regulatory issues. The company, which owns 91 daily papers and 21 television stations, could be constrained in eight or nine of the 12 markets where the papers are for sale. "There are lots of regulatory issues and no easy solutions," said Douglas H. McCorkindale, Gannett's chairman.

Lauren Rich Fine, an analyst at Merrill Lynch & Co., said in a recent report that she believed Gannett would not be interested in the larger papers in Philadelphia and San Jose but "would add selectively to its holdings at the right price."

Another potential bidder, MediaNews Group Inc., a private Denver-based newspaper chain, had no comment.

Yucaipa, headed by billionaire Ron Burkle, was founded in 1986 and has been involved in more than $30 billion in mergers and acquisitions. Former president Bill Clinton is a senior adviser to the firm.

The fund, which has been in discussions with the Newspaper Guild-CWA, a union that represents employees at most of the 12 papers, said it would encourage employees to take an investment stake in the company that would own the papers under its plan.

"Yucaipa will be the principal owners, and employee ownership is a key part going forward," Hall said. "Clearly, that's the intent."