Philadelphia Inquirer, April 27

N.Y. Daily News will look at PNI

By Joseph N. DiStefano
Inquirer Staff Writer

The Philadelphia dailies are among 12 that the McClatchy Co. wants agreements to sell before it buys the rest of Knight Ridder Inc. this summer.

McClatchy said April 26 that it had agreed to turn over control of Knight Ridder newspapers in San Jose, Contra Costa, and Monterey, Calif., and St. Paul, Minn., to MediaNews Group Inc., of Denver, in exchange for $1 billion. Hearst Corp. would provide part of the financing.

The Philadelphia newspapers have attracted a number of potential bidders, and the auction is expected to take at least a few more weeks.

Marc Z. Kramer, chief executive officer of Daily News L.P., and half a dozen of his colleagues are scheduled to visit the Philadelphia newspapers' Broad Street headquarters with investment bankers from Credit Suisse First Boston, according to people familiar with the discussions.

The Daily News is owned by Mortimer B. Zuckerman, chairman of Boston Properties Inc., a publicly traded office development and rental company with buildings in New York, Princeton, and other corporate office markets. Zuckerman also controls the weekly magazine U.S. News & World Report.

Credit Suisse Securities USA L.L.C. is managing the sale of the Philadelphia, Northern California and St. Paul newspapers. McClatchy is also selling six smaller newspapers in Wilkes-Barre and the Midwest.

McClatchy said April 26 that Hearst, which owns the San Francisco Chronicle, would help MediaNews finance the purchase of the California and St. Paul newspapers. If that transaction proceeds as planned, the San Jose and Contra Costa newspapers would be merged with an Oakland-based newspaper group led by MediaNews and also including Gannett Co. Inc. and Stephens Media Group, of Las Vegas, while Hearst would become part owner of MediaNews newspapers in other markets.

The Justice Department said April 26 that it was still reviewing McClatchy's plans for St. Paul in order to ensure that the newspaper would remain competitive with McClatchy's Minneapolis Star-Tribune.

The New York Daily News is among at least five entities that have expressed interest in the Philadelphia newspapers.

Zuckerman, Kramer, and others connected with the Daily News did not return calls seeking comment on their plans.

The Daily News is New York's second-largest daily, but its circulation tumbled by nearly 100,000 copies from 2003 through 2005 under pressure from the rival New York Post, owned by Rupert Murdoch's News Corp.

The Daily News' tabloid format resembles that of the Philadelphia Daily News; both newspapers typically feature a single news, crime or mass-entertainment story on the cover page, with punchy articles and opinion columnists inside.

Philip Meyer, Knight professor of journalism at the University of North Carolina at Chapel Hill, noted that, since the Daily News is not a public corporation, "Wall Street analysts won't be looking at your quarter-to-quarter earnings. That's exactly the relief that the Philadelphia papers need."

The New York Daily News has had relatively amicable relations with its Teamsters union locals, but has not signed contracts with the Newspaper Guild, although many individual Daily News employees are Guild members, according to union leaders.

Zuckerman "is a pretty entrepreneurial guy. He picks the downside of a trend, and buys [assets] at the bottom of a market," said Philadelphia commercial real estate investor Walt D'Alessio, who is familiar with Zuckerman's acquisition record.

Several other groups have also expressed interest in the Philadelphia newspapers.

More than 30 representatives of a Philadelphia-based investment group led by ad man Brian P. Tierney and investor Bruce E. Toll visited the newspapers April 26, along with attorneys from Dilworth Paxton L.L.P., and bankers from JPMorgan Chase & Co., the Citizens Bank unit of Royal Bank of Scotland, and Bank of America, among others.

April 25 , the newspapers hosted a group including Yucaipa Cos. L.L.C., Bear Stearns & Co., and SunTrust Robinson Humphrey, who are backed by the Newspaper Guild. On April 24, it was Avista Capital Partners, of New York. April 28, two companies from Canada, publicly traded Onex Corp., of Toronto, and Black Press, of British Columbia, are expected. MediaNews also expressed interest earlier this year.

Yucaipa had hoped to buy the four newspapers that MediaNews and Hearst are buying, and Yucaipa's supporters in the Newspaper Guild have said they may challenge the sale of those newspapers if they believe Yucaipa and other potential bidders were not given the chance to make an offer.

McClatchy says it will announce buyers as the deals are made.

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