Pressed to succeed
NEW YORK — Gary Pruitt has proved the skeptics wrong before. Now, he’s got an even bigger challenge ahead of him.
McClatchy Co., the relatively small but highly regarded newspaper publisher that Pruitt, 48, runs from Sacramento, Calif., sealed a deal Monday to buy Knight Ridder Inc., a newspaper company more than twice its size.
Pruitt plans to keep 20 Knight Ridder newspapers, including The Miami Herald, Fort Worth Star-Telegram, and sell The Philadelphia Inquirer, the San Jose Mercury News and 10 other papers that don’t fit McClatchy’s strict criteria of being located in cities growing much faster than the national average.
The company’s strategy has been to focus on newspapers that are a dominant local advertising medium, and then use the paper as a core property while focusing on faster growth areas like the Internet. “We can’t change a market, but we can change a newspaper,” Pruitt said in an interview.
Wall Street holds Pruitt and his team at McClatchy in high regard, and the company’s newspapers are also known for a commitment to quality journalism. Pruitt said he didn’t anticipate any layoffs at the newspapers as a result of the merger, but he did say there would be about $60 million in annual costs savings, mainly from eliminating redundant corporate functions and some centrally operated Internet operations.
Some analysts said Pruitt overpaid in McClatchy’s $1.4 billion deal to acquire the parent company of the Star Tribune of Minneapolis in 1997. But it paid down debt at a fast clip, and Pruitt is promising the same this time.
Pruitt indicated that price will be an important factor, but not the only one, in deciding who it sells the 12 Knight Ridder newspapers, which also include the Philadelphia Daily News, the Contra Costa Times in California and the Akron Beacon Journal in Ohio.
“We care who we sell to, and we care about these papers,” Pruitt said on a conference call with reporters. “We are sorry that we’re not retaining them and that they don’t fit, but they will fit other companies’ strategies.”
Analysts generally agreed that the properties would go quickly, and many cited industry leader Gannett Co. and MediaNews Group Inc., a privately held newspaper company in Denver, as likely bidders. Gannett didn’t comment and MediaNews didn’t return a call seeking comment. A union representing Knight Ridder employees also is considering bids.
“A lot of people already came and did the due diligence and kicked the tires,” said Merrill Lynch newspaper industry analyst Lauren Rich Fine. Fine also noted that the newspapers could attract interest from local billionaires. In New York, for example, the major tabloid, the Daily News, is owned by real estate mogul Mort Zuckerman.
Newspaper stocks have been out of favor on Wall Street recently over concerns about declining circulation trends, the competitive threat from the Internet and the rising cost of newsprint.
Those concerns were evident in stock market trading Monday. McClatchy shares fell $1.51, or 2.9 percent, to $51.55 in heavy trading on the New York Stock Exchange after earlier declining to as low as $49.21 a share. Knight Ridder’s shares fell $1.08, or 1.7 percent, to $63.92.
The deal values San Jose, Calif.-based Knight Ridder at $66.38 per share, including $40 per share in cash and 0.5118 of a share of McClatchy’s Class A stock.