KR’s Sale Brings Urgent Reshaping of U.S. News Map
Important Details: What a difference a week makes. One week ago, McClatchy was emerging as the successful bidder in the Knight Ridder auction. Late Sunday, the white smoke emerged with the news that McClatchy had indeed won KR’s 32 dailies, at a not-bad-considering price of $67.25 per share, or $4.5 billion plus $2 billion in debt. It further emerged that the deal was 60 percent cash/40 percent stocks. Outsell believes that a fundamental revaluing of newspaper properties is a clear result of the deal. The KR sale price is a little bit north of 10x EBITDA, a far cry from the almost 13x Lee paid for Pulitzer 14 months ago.
In Outsell’s Opinion: The increasing uncertainties of market share and future revenue streams have caught up with news publishers. Those valuation questions will be further tested immediately. As the ink on the deal was barely dry, 12 of the KR papers – including flagship papers in Philadelphia (the Inquirer) and San Jose (the Mercury News) – learned that their buyer was putting them on the block.
Critical to McClatchy’s plans, and the future of newspaper-owned online classifieds sites, is what happens with CareerBuilder. CareerBuilder is the crown jewel of newspaper-owned properties. It has gained about one-third of the highly profitable online recruitment market for its equal-share owners – Tribune, Gannett, and Knight Ridder. Though Tribune and Gannett can buy out KR’s share now, McClatchy CEO Gary Pruitt made the case loudly that he wants to take over the KR share and that by bringing all the current McClatchy papers into the fold, it would only be stronger. Allowing McClatchy to assume KR’s share would mean CareerBuilder will have a greater market presence. Leaving McClatchy in the cold would be another signal of newspaper industry fragmentation. The fates of other pieces of the puzzle, such as the auto/apartment ad service Classified Ventures, Knight Ridder’s Washington Bureau, and the Knight Ridder Tribune Newswire, will also help determine whether the balance tips toward industry cooperation or fragmentation.