New Twist: Guild Leads Effort To Buy 8 Knight Ridder Papers By Joe Strupp Published: December 22, 2005 5:05 PM ET
NEW YORK Leaders of The Newspaper Guild-Communication Workers of America are seeking investors to purchase the eight Knight Ridder daily newspapers that are represented by the guild, they announced Thursday. Guild President Linda Foley told E&P the effort was aimed at allowing the guild shops under Knight Ridder control to be purchased by companies more likely to avoid severe cost-cutting that has plagued the industry.
The proposal comes as Knight Ridder, which owns 32 newspapers, is on the selling block following demands from its largest shareholders that the "undervalued" company be sold.
In a statement released this afternoon, guild leaders said they had retained two advisory firms - Duff & Phelps Securities, LLC, of Chicago and Ownership Associates, Inc. of Cambridge, MA - to "work with the union to attempt a 'worker friendly' buyout of certain properties of the Knight Ridder newspaper chain."
"We are looking to partner with some equity firms and at least one has expressed interest," Foley said. "We think we can change the whole dynamic here. We believe an employee bid will enhance the value of these properties. With employee involvement in a buyout, there are often tax advantages."
Henry J. Holcomb, president of the Newspaper Guild of Greater Philadelphia, CWA Local 38010, which represents employees at the Knight Ridder-owned Philadelphia Inquirer and Daily News, praised the move. "We are working to avoid winding up with a buyer that doesn't know the vitality of Philadelphia market and would jump to the incorrect conclusion, as Morgan Stanley report on Knight Ridder did, that there is no profitable future for the Daily News and a need to seriously diminish the Inquirer," he said in a statement. "Such mistakes would cause serious social and economic harm to our region."
In addition to the Philadelphia newspapers, those being targeted for the guild-led purchase include the San Jose Mercury News, St. Paul Pioneer Press, Akron Beacon Journal, Duluth News Tribune, Lexington Herald-Leader, Monterey Herald, and the Grand Forks Herald.
"Our first order is to put together an acquisition company led by the employees as well as equity partners and a management team," said Foley, who did not name any additional investors, saying they were still being sought. "The guild would not own it outright." She said the acquisition company would tentatively be called "Value Plus Media."
Knight Ridder spokesman Polk Laffoon had no comment on the guild plan.
Foley admitted that the likelihood of Knight Ridder considering a bid for only a portion of its properties, let alone accepting an offer, was slim. But she said the worker-friendly aspect to the proposal might make it more attractive. "We have got to get Knight Ridder to agree to let us in the process," Foley said. "We are still putting the numbers together and reaching out to Knight Ridder and a number of equity firms."
Foley said at least eight "worker-friendly" equity firms were being contacted, but did not identify them. She also had no timeline for when a formal bid would be ready or what amounts it would have to include to be competitive. "Certainly, within the next weeks," she said.
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The full press release is below:
WASHINGTON, D.C., December 22 - One of the largest unions representing workers in the newspaper industry, the Newspaper Guild-Communications Workers of America, today announced a response to the possible sale of the Knight Ridder newspaper chain. Newspaper Guild President Linda Foley has retained two advisory firms; Duff & Phelps Securities, LLC, of Chicago and Ownership Associates, Inc. of Cambridge, MA, that will work with the union to attempt a "worker friendly" buyout of certain properties of the Knight Ridder newspaper chain. On November 14, The Knight Ridder chain formally announced that it was exploring "strategic alternatives" that include the sale of all of its 32 newspaper properties. A first round of offers for the second largest chain in the nation were received by the firm's investment bank on December 9.
"Standing still is not an option," Foley remarked. "Each of the 8 properties our advisory team has identified is profitable. We think there are solid business opportunities out there. We are going to go after those properties and we are going to attempt to persuade others in labor, management and the investment community to join us. We have formally requested that Knight Ridder open the process to include our bid."
The newspaper properties specified by Duff & Phelps Managing Director Richard May and Ownership Associates, Inc. President Christopher Mackin include the San Jose Mercury News, the Philadelphia Inquirer and Daily News, the St. Paul Pioneer Press, the Akron Beacon Journal, the Duluth News Tribune, the Lexington Herald-Leader, the Monterey Herald and the Grand Forks Herald.
"There is a national network of 'worker friendly' private equity firms that has emerged over the past two decades," Richard May said. "We anticipate that a combination of private equity capital, management capital and employee capital will make possible the purchase of a select number of these newspaper properties. We are also open to exploring joint bids with other strategic and financial partners that have expressed similar interest in the Knight Ridder chain."
A new acquisition corporation, ValuePlus Media Corporation (VMC) will be formed according to advisor Christopher Mackin. The first order of business for VMC will be the naming of a senior management team. This team will decide upon the number of media properties to be acquired, the price to be paid for those properties and the finalization of a corporate business plan. "Fortunately, there is no shortage of talent to draw upon from the newspaper industry," Mackin commented. "We are in discussions with industry leaders that have established records in both digital and print media."
Regular updates will be posted at www.knightridderwatch.org
The Newspaper Guild-CWA represents 35,000 workers in the United States, Canada and Puerto Rico, and CWA overall represents 700,000 workers in telecom, IT, journalism, broadcasting, manufacturing, airlines and other sectors. -------------------------------------------------------------- Please Note: Due to Florida's very broad public records law, most written communications to or from College employees regarding College business are public records, available to the public and media upon request. Therefore, this e-mail communication may be subject to public disclosure.