10 Responses to "Looming Knight Ridder Sale – Yahoo! or Google should be the real suitors"
  1. realist says:

    Go get an MBA and spend a few years running a public company. Then you’ll understand the more complex aspects of what’s going on. BTW, read KRI’s financial filings with the SEC and you’ll get a clearer understanding of how little the Ridder’s own. Good writing though….straight from the heart, but naive.

  2. jinfinite8 says:

    We came across this article in the WSJ after we wrote our post that outlined our exact argument:

    New Beginning for Newspapers?
    By JOSEPH T. HALLINAN and JOE HAGAN Staff Reporters of THE WALL STREET JOURNAL
    November 3, 2005; Page C1

    Excerpt – \”Conventional wisdom holds that Gannett, the largest newspaper company, might be a good suitor for Knight Ridder. Others think a consortium of private-equity investors is more likely, since newspapers are considered cheap, but remain good cash-flow vehicles that would help finance a leveraged buyout. Some think a new-media company such as Yahoo Inc. or eBay Inc. might be interested.

    Newspapers still dominate local news and advertising in many markets. That could attract a company such as Yahoo, which has moved increasingly into original content and would like to develop its local reach. Meanwhile, Google Inc. has expressed interest in entering the classified-ad market, where newspapers have deep relationships and continue to play a dominant role. Knight Ridder is part-owner of CareerBuilder Inc., the online classified Web site that competes with Monster.com.\”

    Funny, we aren\’t the only naive ones! The first author, Joseph Hallinan is a Pulitzer Prize-winning journalist that was named a Nieman Fellow at Harvard University. Joe Hagan was a New York Observer writer and is now a media reporter for the Wall Street Journal where he expanded his coverage from mainly television to media in general, with more of a focus towards print. Not sure if they have their MBA\’s.

    And, yes we know that Tony Ridder owns 1.9% of KR and no member of the Knight or Ridder families own more than 5%. We were trying to provide an alternative point of view to what is being discussed out there.

    We love the open exchange of ideas, that\’s the point of a blog right? Thanks for the comment – er..sort of. Straight forward, but a little condescending 😉

  3. realist says:

    Point: “Some think a new-media company such as Yahoo Inc. or eBay Inc. might be interested.”

    Comment: To date, much has been leaked and revealed about what companies are actually looking at the deal. Not once has a new-media company been named or revealed as truly looking at KRI. Thinking is one thing, acting another. While many journalists like the idea of new-media companies as a the saviour, the reality is new-media companies aren’t likely to jump in and buy when they can partner and “date” first. Heck, they can even play around and hire a few journalists to see what happens (Yahoo). Last time someone jumped in, the pain came fast — AOL and Time Warner.

    Point: “Others think a consortium of private-equity investors is more likely, since newspapers are considered cheap, but remain good cash-flow vehicles that would help finance a leveraged buyout.”

    Comment: If this happens, things will only get worse at Knight Ridder. Souless money folks will take it apart piece by piece to maximize profits. When financial targets are hit, they sell. Can anyone say hello to Dean Singleton or Bob Jelenic down the road? Hopefully, a strategic buyer win this thing…

    Point “…Knight Ridder is part-owner of CareerBuilder Inc., the online classified Web site that competes with Monster.com.”

    Comment: Part-owner is the operative word. I’ve heard from analysts that Careerbuilder owners have the right to buy out each other on any change of control. My bet would be GCI and TRB would exercise that right if the purchaser were not strategic (e.g. a newspaper company).

    Point: “Funny, we aren’t the only naive ones!”

    Comment: Indeed more than one person can be naive. I’d alter my statement a bit to say you’re all hoping for something that’s not going to happen. From a truly financial and strategic perspective, Yahoo, Google and eBay don’t need newspapers. You’re all hoping for a silver bullet to save what you love. That’s not necessarily a bad thing, it’s just too simplistic.

    Knight Ridder made a bad mistake in the 70s when it scoffed at the idea of having a two-tiered stock. In essense, the people making that decision sold out Knight Ridder. They also sold out the great KRI journalistic heritage by giving away the only protection they truly had from the heathen at the gates.

    Point: “Thanks for the comment – er..sort of. Straight forward, but a little condescending.”

    Comment: Sorry. Not meant to be. The directness is resultant from too many years standing at the previous mentioned gates with the heathen financial folks on the other side.

  4. Julian says:

    Julian: Good conversation Realist – keep it coming. Here are some points to further clarify my position. I’m not saying I want to see newspapers saved, but I do want to see their core offering: local news and classifieds (especially news content) taken to the next level both in print and online. Internet companies have done a good job of going after the money behind classifieds but a crappy job with the hard stuff – local news. Just like new media companies have completely failed at building a real local sales force – still the province of established companies. KR needs a revitalized product offering and a better resulting valuation for the stock. If you take care of the product, which frankly KR hasn’t been doing, the street will recognize it. I do believe that a new media company has a better chance of accomplishing this than a Gannett or private equity firm.

    “Comment: To date, much has been leaked and revealed about what companies are actually looking at the deal. Not once has a new-media company been named or revealed as truly looking at KRI. Thinking is one thing, acting another. While many journalists like the idea of new-media companies as a the saviour, the reality is new-media companies aren’t likely to jump in and buy when they can partner and “date” first. Heck, they can even play around and hire a few journalists to see what happens (Yahoo). Last time someone jumped in, the pain came fast — AOL and Time Warner.”

    Julian: Agreed, we don’t think it’s very likely to happen either, more that Google and Yahoo! would benefit from KR’s content, local advertiser relationships and their feet on the street. Google and Yahoo! do need these things to improve but you’re right that they can build them for themselves. On that point I don’t believe that either company just wants partnerships at this point, they want to own it and their more recent actions demonstrate that. Example: After years of waiting for the right time Yahoo! has jumped into building their local feet on the street sales force. Google on the other hand still thinks they can conquer the local space through a browser (for the moment). Indeed, if the world was only made up of people from Gen Y then Google would stand a shot with this strategy…

    Point: “Others think a consortium of private-equity investors is more likely, since newspapers are considered cheap, but remain good cash-flow vehicles that would help finance a leveraged buyout.”

    “Comment: If this happens, things will only get worse at Knight Ridder. Souless money folks will take it apart piece by piece to maximize profits. When financial targets are hit, they sell. Can anyone say hello to Dean Singleton or Bob Jelenic down the road? Hopefully, a strategic buyer win this thing…”

    Julian: Absolutely, my original article agrees completely with you on this point. I had an e-mail exchange off the blog about KR with a former CEO from the local print/online space last week where he expressed the sentiment that private equity firms with a growth mindset (vs. traditional LBO model) might well make a better company out of KR (he cited Blackstone, Bain and Thomas Lee to name a few).

    Point “…Knight Ridder is part-owner of CareerBuilder Inc., the online classified Web site that competes with Monster.com.”

    “Comment: Part-owner is the operative word. I’ve heard from analysts that Careerbuilder owners have the right to buy out each other on any change of control. My bet would be GCI and TRB would exercise that right if the purchaser were not strategic (e.g. a newspaper company).”

    Julian: Yes, I mentioned that in the original story and CareerBuilder will definitely be a major focus of ANY deal since KR and newspaper companies like KR make the majority of their online and print revenues from recruitment advertising.

    Point: “Funny, we aren’t the only naive ones!”

    “Comment: Indeed more than one person can be naive. I’d alter my statement a bit to say you’re all hoping for something that’s not going to happen. From a truly financial and strategic perspective, Yahoo, Google and eBay don’t need newspapers. You’re all hoping for a silver bullet to save what you love. That’s not necessarily a bad thing, it’s just too simplistic.

    Knight Ridder made a bad mistake in the 70s when it scoffed at the idea of having a two-tiered stock. In essense, the people making that decision sold out Knight Ridder. They also sold out the great KRI journalistic heritage by giving away the only protection they truly had from the heathen at the gates.”

    Julian: You’re right, I don’t think it will happen and it is wishful thinking. You’re also right that Google and Yahoo! don’t need KR – but they could use parts of KR that would immediately make them better companies.”

    Point: “Thanks for the comment – er..sort of. Straight forward, but a little condescending.”

    “Comment: Sorry. Not meant to be. The directness is resultant from too many years standing at the previous mentioned gates with the heathen financial folks on the other side.”

    Julian: No offense taken, I can see how one would take the wishful thinking in my post for naiveté. Thanks again for the conversation Realist.

  5. Julian says:

    The latest news on Knight Ridder from the Wall Street Journal reminds me of trying to loose 40 lbs. in two months to look great for your school reunion. Can you say cash cow? Gimme a break.

    Story here: http://online.wsj.com/public/article/SB113807561016954481-hpMIdcoBMWc6ZqaOb8HErEg2QKs_20060131.html?mod=blogs

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