Philadelphia Group Wins Bid for Papers

McClatchy Co. is selling the Philadelphia Inquirer and the Philadelphia Daily News to a group of local investors who hope to reverse circulation declines by emphasizing local news and doing more with the Internet.

McClatchy will receive $515 million in cash, and the investment group, Philadelphia Media Holdings, will assume $47 million in pension liabilities.

The Philadelphia papers are being bought by a group led by advertising executive Brian Tierney and Bruce Toll, co-founder of luxury-home builder Toll Bros. Inc. The papers are owned by Knight Ridder Inc. and are among a dozen that McClatchy doesn’t plan to keep once it completes its purchase of the rest of the company.

McClatchy and the investor group said Tuesday that they intended to complete the deal about the same time that McClatchy closes its deal for Knight Ridder, which is expected this summer.

Once Sacramento-based McClatchy closes its purchase of Knight Ridder’s remaining 20 papers, it will become the second-largest newspaper company in the country, after Gannett Co.

The deal returns the Philadelphia papers to private ownership for the first time since 1969, when Walter H. Annenberg sold them to Knight Newspapers Inc. after being named U.S. ambassador to Britain.

“The next great era of Philadelphia journalism begins today with this announcement,” Tierney said. “We intend to be long-term owners committed to serving this region with the vigorous, high-quality journalism we all expect of the Philadelphia Inquirer, Daily News and Philly.com, and we intend to preserve both papers and their unique and valuable contributions.”

Tierney said the “plan is to invest in and grow both papers, not allow them to erode.”

The sale of the two papers is part of McClatchy’s plan to divest 12 of 32 newspapers it is buying from Knight Ridder for about $4.5 billion plus the assumption of $2 billion in debt.

Most of the publications being sold were targeted because they didn’t fit McClatchy’s strategy of buying newspapers in growing markets.

In the six-month period ended in March, the Inquirer’s weekday circulation was nearly 350,500, according to the Audit Bureau of Circulations, down 5.1% from the same period a year earlier.

The Philadelphia papers’ combined circulation in September was down 30% from its peak in the 1980s, following a national trend. The two papers have struggled to keep up with new competition in recent years and have suffered declining circulation and revenue.

Tierney and Toll said they wanted to beef up the Inquirer’s local news coverage and Internet presence. The buyers also might start up sports and business weeklies and expand downtown coverage to attract real estate advertising.

Philadelphia Daily News columnist Stu Bykofsky said he was pleased that the paper would no longer be “tied to the dictates of Wall Street.”

Other bidders for the two papers included Mortimer B. Zuckerman, owner of the New York Daily News; Black Press Group Ltd., a Victoria, Canada-based newspaper publisher; and Yucaipa Cos., a Los Angeles investment firm run by Ron Burkle that is working with a newspaper union.

William Dean Singleton of MediaNews Group Inc. in Denver also was interested.

Bruce Toll, who is making a personal investment not tied to his company, said he was surprised, happy and excited to be a part of the winning bid. He said he grew up reading the papers, but his interest was mainly as an investor: “This is business. There’s some emotion, of course, but it’s still business.”