Knight Ridder Bidders Gain Financial Partners

As Knight Ridder Inc. begins meeting with potential buyers this week, new names are emerging as contenders for the country’s No. 2 newspaper chain.

At least three previously undisclosed private equity firms have joined groups interested in acquiring the publisher of the San Jose Mercury News, Philadelphia Inquirer and 30 other papers. In addition, both the union representing thousands of Knight Ridder employees and a group of top executives at the chain are trying to find financial partners for their own bids, participants in the auction said Tuesday.

Two of the new entrants, Bain Capital and Hellman & Friedman, have teamed up with Thomas H. Lee Partners and Texas Pacific Group in one coalition, two people involved in the process said.

In addition, people involved in the auction said, Vestar Capital Partners has joined forces with Madison Dearborn Partners, which already had been identified as a bidder.

Those coalitions are vying with at least one other previously reported combination: investment firms Kohlberg Kravis Roberts & Co., Blackstone Group and Providence Equity Partners.

The firms involved declined to comment, and a Knight Ridder spokesman didn’t return a phone call.

Many of the private equity firms, which use money from institutions and wealthy individuals to make equity investments, have worked together in the past, some of them on media deals. Their interest in Knight Ridder is a good sign for Knight Ridder shareholders and newspapers in general, which have been battered by concerns about competition from the Internet.

Still in the running are newspaper companies including McClatchy Co., owner of the Bee papers, and MediaNews Group Inc., owner of the Los Angeles Daily News and the Press-Telegram of Long Beach.

Gannett Co., publisher of USA Today and the largest U.S. newspaper chain, was reported by one merger-tracking firm to have made and then withdrawn a bid, but an editor at the firm, MergerMarket Ltd., told CNBC on Tuesday that Gannett could reenter the bidding in coming weeks. Gannett and McClatchy declined to comment.

Knight Ridder, which put itself up for sale in November under pressure from unhappy shareholders, could take two months or more to negotiate a sale.

Because the eventual price is expected to exceed $4 billion, most buyout firms and newspaper companies would be hard pressed to bid on their own.

In even more need of financial backing are the union and management efforts.

The Newspaper Guild-Communications Workers of America, rebuffed in its attempt to bid for just eight of Knight Ridder’s papers, is trying to ally with McClatchy and other interested parties, union officials said.

McClatchy might make the most sense, a union official said, because analysts believe it is most interested in smaller, nonunion papers, whereas the union wants such properties as the Philadelphia and San Jose papers.

Two financial professionals involved in the possible sale said a number of Knight Ridder executives, not including Chief Executive Tony Ridder, were teaming up and seeking a backer.

One of the professionals said the slate was being led by Art Brisbane, 55, and Hilary Schneider, 44, who were both recently promoted to senior vice president. They oversee a combined 11 papers and Knight Ridder Digital.

Neither Brisbane nor Schneider returned calls seeking comment. A campaign by them is logical because an unfriendly buyer might install an executive team from outside, said analyst Doug Arthur of Morgan Stanley.

“Hilary and Art are both pretty young, they were just promoted, and this was their big chance after waiting in the wings,” Arthur said. “Now it’s being pulled out from under them.”