Burkle Plans to Bid for Papers

The investment firm controlled by Los Angeles billionaire Ron Burkle is planning to bid for all 12 of the Knight Ridder Inc. newspapers that were put on the auction block last week after the San Jose-based chain agreed to be acquired by McClatchy Co.

Robert Hall, hired by Burkle’s Yucaipa Cos. to advise on the bid, said Wednesday that the firm planned to give formal notice of its intention to bid for the papers, which include the Philadelphia Inquirer and Daily News, the St. Paul (Minn.) Pioneer Press and three California papers: the San Jose Mercury News, the Monterey County Herald and the Contra Costa Times.

Hall, a former publisher of the Inquirer and Daily News, wouldn’t put a dollar amount on Tuesday’s anticipated bid for the papers, which analysts have valued at $1.4 billion to $2 billion. He said Yucaipa was talking to other potential investors and was hammering out an operating strategy for the papers.

Several newspaper companies, including MediaNews Group Inc. and Gannett Co., could make bids for at least some of the papers, which Sacramento-based McClatchy is selling to help finance its $4.5-billion purchase of Knight Ridder. McClatchy declined to comment Wednesday.

Yucaipa already had teamed with the Newspaper Guild-Communications Workers of America to explore a bid for all of Knight Ridder. Burkle, a major Democratic fundraiser known for buying and selling West Coast grocery chains such as Ralphs, has a history of working with organized labor, and the guild represents workers at eight of the 12 papers McClatchy is selling.

If the Burkle-union bid succeeds, the guild plans to invite employees to invest some of their 401(k) savings in the new company. The union has said that employee ownership would provide tax advantages for a joint bid with Yucaipa.

Hall said that if Yucaipa acquired the papers, it might cut advertising rates at some of the publications and would probably refrain from raising newsstand prices -- potentially lowering profit while it pursued strategies for increasing circulation and juicing ad sales.

“The advantage is, Yucaipa is a very patient investor, as well as a private investor� without pressure from public shareholders, said Hall, who had been advising Yucaipa for more than a month before signing on formally with the firm this week.

“The plan will probably be lower margins than would otherwise be expected and an emphasis on long-term growth.�

Asked if newsrooms could expect more consolidation, he noted that Knight Ridder had already trimmed editorial ranks considerably.

“The most important thing about newspapers is that they really serve the local market, so I’m not sure there are a lot of combinations to share news,� he said. “I have not thought about any operational things in the newsrooms that could be combined.�

Other changes would come gradually, beginning in 2007, Hall said.

“You don’t like to make changes too quickly, because readers have habits,� he said. “If these organizations are really going to be focused on providing a better news product, it will take a little time.�

McClatchy hopes to close the sales of the 12 papers at the same time it completes its acquisition of Knight Ridder, which is expected this summer. McClatchy has said it would prefer a buyer with a commitment to quality journalism, a position that Yucaipa spokesman Frank Quintero said Wednesday should help the union bid.