A one-newspaper Twin Cities?

Neither McClatchy nor Knight Ridder, both based in California, had any comment or would confirm the bids. Anonymous sources cited by several financial news outlets say the much smaller McClatchy has offered $65 a share for Knight Ridder, or more than $4 billion in all. A group of private equity firms has reportedly made a second bid, for less money but all in cash.

Knight Ridder, which owns 32 daily newspapers, put itself on the market in November at the behest of its largest shareholder, Private Capital Management -- an investment firm unhappy with the return it was getting. Knight Ridder's board is expected to meet this weekend to consider the offers.

Dave Emmons is an associate with W.D. Grimes and Company, which helps structure financial deals in the newspaper industry -- but is not involved in this one. Emmons says the Knight Ridder board is beginning a complicated evaluation of offers with a lot of facets.

"It's not so much looking at how much the offer is, the largest dollar amount; it's going to be the structure of the deal. It's also going to have to do with the culture; Knight Ridder is strong journalistically and they're going to want to find a buyer that's going to come in and continue that tradition," according to Emmons.

I don't think anyone thinks that the readers of St. Paul and the East Metro would be well-served without the Pioneer Press being their newspaper.

Emmons says that may give McClatchy an edge, over the private equity firms also bidding for Knight Ridder. It is worth noting that Private Capital Management, the large shareholder that pushed Knight Ridder in November to sell itself, is also the largest shareholder in McClatchy, owning more than one third of the company.

Others are not so sure Knight Ridder's board will be ready to do a deal at all.

"It's a very low price," says John Morton, a veteran newspaperman who now runs a media consulting firm. He says the offer from McClatchy is no slam-dunk.

"At the price that's been talked about, 65 bucks or so, it's conceiveable Knight Ridder's directors will decide this is a bad time to sell a newspaper company and will just take it off the market," he says.

Speculation over the deal has focused attention on the Twin Cities, where McClatchy and Knight Ridder compete on the same news turf. Experts disagree on what McClatchy would do with two Twin Cities newspapers if it wins the bidding for Knight Ridder. Morton believes the U.S. Justice Department would not permit McClatchy, to consolidate the metro's two papers, or to simply close the Pioneer Press. He also doubts the Justice Department would let McClatchy operate both papers separately.

"It's hard to imagine the antitrust division going along with two fairly major newspapers cheek-by-jowl being owned by one company, where before they had been commercially competitive," he says.

Under that scenario the Pioneer Press could be among a number of Knight Ridder papers spun off as part of the deal. An investment group led by the union for newspaper reporters and other editorial workers has expressed interest in buying the paper and several others if they come on the market.

Other industry-watchers aren't so confident antitrust concerns will keep the Twin Cities from becoming a one-paper town. Joe Mathewson, a lawyer and professor of business journalism at Northwestern University's Medill School of Journalism, says consolidation and cost-cutting are a large reason investors want to do deals like this one.

"That's been the trend for years. And that would be sad -- to lose good newspapers just for purely economic reasons, to satisfy investors on Wall Street," he says.

In the Pioneer Press newsroom, the possible sale of Knight Ridder to McClatchy has been unsettling for reporters like Jack Sullivan. Sullivan joined the paper two years ago, and leads a team covering Washington County.

"You've got reporters and editors here who came here because they care a lot about St. Paul and they want to work for the newspaper they think covers St. Paul the best," according to Sullivan. "And to think about that sort of a prospect, I don't think anyone thinks that the readers of St. Paul and the East Metro would be well-served without the Pioneer Press being their newspaper."

Sullivan says one way or another, employees are hoping the uncertainty will end soon. That seems unlikely. While sorting out a deal with McClatchy might be complicated enough, many analysts still expect additional bids from other media companies, including the nation's largest newspaper owner, Gannett.

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