McClatchy Completes Divestiture Plan: Concludes Sales of All 12 Former Knight Ridder Newspapers
The McClatchy Company (NYSE: MNI) confirmed today that it has now completed its divestiture plan with the closing of sales of all 12 former Knight Ridder newspapers it identified for divestiture at the time of the announcement of the Knight Ridder acquisition. In all, McClatchy received $2.078 billion from the sales of the papers, which represents a multiple of 11 times their trailing 12-month cash flows.
McClatchy announced earlier today that it had completed its transaction with MediaNews Group, Inc. (MediaNews) and Hearst Corporation (Hearst) under which MediaNews has acquired the San Jose Mercury News and Contra Costa Times, and Hearst acquired the Monterey (CA) Herald, and the St. Paul Pioneer Press in St. Paul, Minnesota.
"This is the final milestone in the McClatchy-Knight Ridder transaction, as we have now closed the sales of all the newspapers we identified for divestiture," said Gary Pruitt, CEO of McClatchy. "We are pleased to have executed as we promised in this deal, finding good buyers, getting full prices and helping ensure committed owners for all 12 papers we divested."
"The transactions for CareerBuilder, ShopLocal.com and Topix.net highlight the value of the equity investments we acquired from Knight Ridder, which we now believe have a value of $1 billion compared to the $500 million we initially assigned to them. The total purchase price for our acquisition of Knight Ridder represents about 7.9 times trailing cash flows after giving effect to the after-tax proceeds of about $1.4 billion from the sales of all 12 newspapers, estimated annual synergies of $60 million and the higher value of the equity investments of $1 billion."
Mr. Pruitt concluded, "Our newly announced partnership in CareerBuilder, and the use of the proceeds of these transactions to reduce our debt, position McClatchy extremely well as we move aggressively to apply our tested operating strategies to all McClatchy newspapers. Our attention now turns entirely to operating and growing our leading local media businesses in 30 premium markets around the country."
McClatchy borrowed $3.076 billion in connection with the Knight Ridder acquisition in order to pay shareholders and refinance its and Knight Ridder's existing bank debt. McClatchy also used the proceeds from the sale of four newspapers that were sold simultaneously with the closing of the Knight Ridder acquisition to fund a small portion of its obligations under the acquisition. Total debt on the closing date, including $1.6 billion in bonds assumed, was $4.676 billion. Net cash proceeds after taxes from the sales of the 12 newspapers and the previously announced sale of a portion of McClatchy's stake in internet assets CareerBuilder, Topix.net and ShopLocal.com totaled approximately $1.60 billion. As of August 2, 2006, total debt net of balance sheet cash now stands at $2.58 billion. Over the balance of the year, McClatchy will remit federal and state tax payments related to these transactions. After deducting state tax payments on the federal return in 2007, federal and state taxes related to the transaction will be approximately $700 million.
The McClatchy Company is the second-largest newspaper company in the United States, with 32 daily newspapers and approximately 50 non-dailies. McClatchy-owned newspapers include The Charlotte Observer, Fort Worth Star-Telegram, The Miami Herald, The Kansas City Star, the (Minneapolis) Star Tribune, The (Raleigh) News & Observer and The Sacramento Bee. In addition, McClatchy has a robust network of valuable internet assets, including leading local websites in each of its daily newspaper markets, offering readers information, comprehensive news, advertising, e-commerce and other services. The company also owns and operates McClatchy Interactive, an interactive operation that provides websites with content, publishing tools and software development; Real Cities ( http://www.RealCities.com ), the largest national network of city and regional websites, operating in more than 110 U.S. markets; and is part owner of CareerBuilder, the nation's largest online classified employment listing service. McClatchy also owns 25 percent of Classified Ventures, a newspaper industry partnership that includes such online classified web sites as cars.com and apartments.com.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
Statements in this press release regarding: the expected use of proceeds from the transactions and any other statements about management's future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words "believes," "plans," "anticipates," "expects," estimates and similar expressions) should also be considered to be forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including the factors described in McClatchy's Annual Report on Form 10-K for the year ended December 25, 2005. McClatchy disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this document.