Burkle May Bid High for Newspapers
Los Angeles investor Ron Burkle may be willing to pay more than $2 billion for the 12 Knight Ridder Inc. newspapers now up for sale -- a price that could make him a serious contender in the bidding.
Burkle’s Yucaipa Cos., in alliance with a union representing newspaper workers, last week submitted a tentative bid for the papers that included a range of possible prices. Two people familiar with Burkle’s offer said Wednesday that the upper end of the bid was “in the neighborhood” of $2.2 billion.
Although the bid was based on sketchy information and could change, analysts said a solid offer of that magnitude would put Yucaipa in a strong position to win at least some of the papers. Several Wall Street analysts had said the papers wouldn’t fetch more than $1.75 billion for Sacramento-based McClatchy Co., which plans to sell them as part of its $4.5-billion deal to acquire Knight Ridder.
The papers, which include the Philadelphia Inquirer and Daily News and three California publications -- the San Jose Mercury News, the Monterey County Herald and the Contra Costa Times -- have drawn a flurry of interest from big newspaper chains as well as numerous local investor groups.
MediaNews Group of Denver, which owns the Daily News in Woodland Hills and several papers in the Bay Area, was in talks with McClatchy’s bankers last week but apparently didn’t offer enough to end the auction process, analysts said. MediaNews, run by William Dean Singleton, had a head start because it had access to confidential financial data given out during the earlier bidding for all of Knight Ridder.
Yucapa’s union ally, the Newspaper Guild-Communications Workers of America, led other bidders in complaining last week that it wasn’t getting access to the data, including revenue and profit margins for each paper. It asked elected officials to press McClatchy for fair treatment.
On Wednesday, guild advisors said they had been told they would get the information. Local bidders interested in the papers in Monterey and St. Paul, Minn., said they too had been assured they would have what they needed.
“We’re confident we will get a shot,” said John Wodele, a spokesman for the group of eight investors in St. Paul.
McClatchy might have wanted to sell all or most of the papers to MediaNews, said newspaper broker Larry Grimes, but “it could be that the offer is not overwhelming.”
In the coming weeks, bidders said, McClatchy will entertain offers for individual newspapers or small clusters of them, beginning with the Philadelphia Inquirer and Daily News. That increases the chance that the papers will go to multiple owners, Grimes said.
A $2.2-billion bid for the 12 papers would amount to about 10 times their annual cash flow. “That’ll be tough to beat” for other interested parties, said independent analyst John Morton. At least one other party has made a bid for some papers based on the same formula.
A sale at $2.2 billion or more could be seen as based on a richer valuation than McClatchy paid for Knight Ridder, Morton said. “It would be a positive commentary on the newspaper business” if the papers sell for that much, he said, particularly because McClatchy is keeping the Knight Ridder papers it believes have the greatest growth potential.
Burkle has bought and sold major supermarket chains and enjoyed good relations with that industry’s unionized workforce. Under the plan developed by the newspaper union, which represents employees at eight of the 12 Knight Ridder papers that are on the block, Yucaipa would take ownership of as many of the properties as possible, then offer workers a chance to buy stakes with their 401(k) retirement accounts.
