Press run ends for Knight Ridder

SAN JOSE, Calif. — Knight Ridder shareholders Monday approved the company's sale to McClatchy during an emotional meeting that served as a funeral for the nation's second-largest newspaper publisher.

Before announcing that the sale had been approved by nearly 98 percent of the shareholders that voted, Knight Ridder Chairman Tony Ridder spent most of the 45-minute session extolling the achievements of the company's 32 daily newspapers.

As he wrapped up his eulogy, Ridder broke down in tears while an audience filled with members of his family and former company executives rose to console him with applause.

"Knight Ridder is a great company," Ridder told the gathering of just over 100 people, several of whom also were crying. "It was shaped by giants of our industry."

Sacramento, Calif.-based McClatchy is expected to take control of San Jose, Calif.-based Knight Ridder after the stock market closes today, marking the end of a company with roots dating back to 1892, when Tony Ridder's great-grandfather Herman Ridder bought a German-language paper in New York.

Ridder Publications eventually merged with Knight Newspapers in 1974, forming a company that produced some of the country's biggest papers. The list includes The Miami Herald, The Philadelphia Inquirer, The Kansas City Star, The Charlotte Observer, St. Paul Pioneer Press, Fort Worth Star-Telegram and San Jose Mercury News.

McClatchy already has arranged to sell 12 of the Knight Ridder papers to eight different buyers for a combined $2.1 billion to help reduce the debt it is taking on in the deal. The deal for the last paper to be sold, the Times Leader of Wilkes-Barre, Pa., was announced earlier Monday.

As part of the transaction, McClatchy also acquired Knight Ridder's 49.5 percent interest in The Seattle Times Co. The remaining voting shares are controlled by Seattle's Blethen family, which founded the paper 110 years ago. McClatchy has said it intends to be a passive, minority investor, leaving management to the Blethens.

Knight Ridder chafed in that role. Tony Ridder criticized Times management and made several bids to buy out the Blethens.

McClatchy executives, in contrast, have said only nice things about the Blethens since the Knight Ridder buyout was announced three months ago, and a Times spokeswoman has complimented McClatchy.

McClatchy will have seats on The Times' board. Some observers have said that could be awkward, since McClatchy owns the neighboring (Tacoma) News Tribune and could use its board position to gain information on Times strategy.

But McClatchy Vice President Robert Weil said in April that shouldn't be a problem. "The operational side of the newspapers doesn't come up at board meetings," Weil said.

The Justice Department made calls exploring antitrust implications of McClatchy's minority stake in The Times, but the San Jose Mercury News reported last week the agency had signed off on the entire Knight Ridder deal. A department spokeswoman declined comment Friday.

About 20 of Ridder's relatives, including his mother and several grandchildren, attended the company's final meeting. The clan had just returned from a family reunion last week in Wyoming.

Ridder, 65, is to receive a $9.4 million severance payment after the sale closes, part of a $57 million windfall due to Knight Ridder's top executives and managers.

Knight Ridder's papers wound up winning 85 Pulitzer Prizes — journalism's highest honor — but those achievements didn't seem to matter much on Wall Street, where institutional investors are increasingly dissatisfied with the industry's shrinking profit margins as more advertising shifts to the Internet.

Those pressures buried Knight Ridder, whose shares sank from a high of $80 a share in 2004 to a low of $52.42 last year despite Tony Ridder's persistent efforts to boost the company's earnings with cost cuts and other measures.

The sliding stock price exasperated Knight Ridder's three largest shareholders, who confronted the board last year.

That rebellion led to the McClatchy sale, a cash-and-stock deal initially valued in March at $67.25 a share, or $4.5 billion, plus $2 billion in assumed debt.

But investor concerns about the deal contributed to a 24 percent decline in the acquiring company's stock price, lowering the value of the deal to $4.1 billion, or $60.70 a share.

"It's an even bigger bargain now," said Ridder, who is expected to join McClatchy's board after the deal closes.

Information about Knight Ridder's stake in The Seattle Times provided by Seattle Times reporter Eric Pryne.