Bank of America and JPMorgan are leading $3.75 billion in loans backing The McClatchy Co.'s acquisition of Knight Ridder, according to a filing with the Securities and Exchange Commission. The deal is made up of a $2.2 billion "A" term loan; a $1 billion revolver and a bridge loan that could be worth as much as $550 million. Knight Ridder owns 32 papers, including The Miami Herald, The Kansas City Star and the Fort Worth Star-Telegram. McClatchy owns The Minnesota StarTribune, its largest paper, and The Sacramento Bee, among others.
Last November, three of Knight Ridder's largest shareholders forced the company to put itself up for sale as a way to boost shareholder value. The $6.5 billion deal, which includes assumed debt, was agreed upon March 13. Once the merger has been completed--sometime in the next three to four months--the combined company may be selling up to 12 of Knight Ridder's newspapers. The Philadelphia Daily News, The Philadelphia Inquirer and The San Jose Mercury News have all been mentioned as potential names that could be sold.
One investor saw the potential sale of those 12 papers as the best move McClatchy could make. "They are assuming a lot of debt in this deal and in order to make this deal successful for them, they may ultimately [have to] sell those papers. Media is still a good investment, but it's not as booming as it used to be thanks to people reading online; that cuts down on ad and circulation money," he explained.
The acquisition vaults McClatchy into the number two newsprint company by circulation in the U.S., with a daily circulation of over three million papers. Gannett Co., which publishes USA Today, is number one. Another investor noted the additional benefit of the acquisition for McClatchy, outside of the core newspaper business, is its subsidiaries. "They [McClatchy] are also getting Knight Ridder's share of Careerbuilder; it's a third of the company. It's pretty popular now, so that's an added bonus for them," he explained.
Calls to Steven Rossi, cfo at Knight Ridder, and Patrick Talamantes, cfo at McClatchy, were not returned. Calls to JPMorgan were also not returned and bankers at B of A declined to comment.