On November 1, Private Capital Management of Naples, FL, complained its stock in Knight Ridder had fallen. PCM owned 19% of Knight Ridder and reported a $100 million drop in its Knight Ridder holdings. PCM called for a sale of Knight Ridder. Two days later, Harris Associates LP and Southern Asset Management Inc. also argued for a sale on behalf of their combined 17% of the company’s stock. Knight Ridder is publisher of The State and 31 other newspapers.

The market capitalization value (all of the shares outstanding times the share price) is about $4.3 billion, and a sale should go for at least that much.

In November insiders were suggesting Knight Ridder may not sell due to low bids or unsatisfactory bidders or any number of reasons. But now that the process has been going on for so long, a sale is expected.

Among the suitors is the McClatchy Co., publisher of the Sacramento Bee . McClatchy carries a reputation for high standards in journalism. The Los Angeles Times reported last week a newspaper union, the Newspaper Guild–Communications Workers of America, was trying to link up with McClatchy. The union was earlier rebuffed for trying to buy just eight of the Knight Ridder newspapers. The sale advertisement is for all of the newspapers for one price. Columbia could benefit because the union is not necessarily interested in the non–union State.

McClatchy representatives met with Knight Ridder’s higher-ups for two days last week. Present were publishers of some of Knight Ridder’s larger newspapers such as the Charlotte Observer , the San Jose Mercury News , and the Philadelphia Inquirer . Knight Ridder, compared with McClatchy, has some of its newspapers in slow–growth areas of the country, areas in which McClatchy is not interested.  

A McClatchy deal would likely trigger a sale of the smaller, non-union Knight Ridder papers, and The State could be for sale on its own. Any interested buyer should seriously consider a price around $300 million, roughly what the business community sees as a sale price of The State . To snare The State for $300 million, probably at least 10% in cash has to be produced before financing could be found, and that’s optimistic. A 20% cash payment could be necessary because most private equity buyouts in corporate America are requiring the 20%.