Deadline Nears for Bids on Philadelphia Newspapers

PHILADELPHIA _ Five would-be owners of The Philadelphia Inquirer and the Philadelphia Daily News have until 5 p.m. Tuesday to deliver signed bids for the newspapers.

A sixth potential buyer, MediaNews Group Inc., of Denver, is standing by a bid it submitted last month, according to people familiar with the company’s plans.

McClatchy Co., which is selling the papers after striking a deal to buy the Knight Ridder newspaper chain, says it will announce the new owner once it picks a buyer and cuts a deal, probably later this month.

The level of interest raises the possibility that McClatchy’s bankers could boost the final price, increasing pressure on the new owner to trim costs.

The sale is likely to return Philadelphia’s major dailies to private control after 35 years as part of publicly traded Knight Ridder Inc. and its predecessor, Knight Newspapers Inc.

Knight Ridder went on the auction block last fall under pressure from shareholders disappointed by the company’s failure to boost profits through previous cost-cutting. McClatchy agreed to buy Knight Ridder, then hired Credit Suisse Securities (USA) L.L.C. to resell the two Philadelphia newspapers and 10 others.

A group headed by MediaNews agreed last month to pay $1 billion for newspapers in St. Paul, Minn., and three California cities; McClatchy hopes to sell the rest by July.

Another bidder could emerge before the ink is dry. No deal will be final until the price has been paid and the Philadelphia newspapers have a new owner.

Here is a list of prospective bidders that have visited the Philadelphia newspapers this year, in order of their arrival.

MediaNews. The chain of 40 daily newspapers _ the majority co-owned by Gannett Co. Inc. _ nearly bought the Philadelphia newspapers last month, but dropped its offer below McClatchy’s $600 million asking price after the newspapers posted disappointing financial results, according to people familiar with the bid. The MediaNews offer remains on the table.

MediaNews is controlled by veteran newspaper operator W. Dean Singleton and newsprint mogul Richard D. Scudder.

Singleton runs a cost-conscious organization in which local publishers have lots of power, and quality and working conditions vary from newspaper to newspaper. Its flagship Denver Post plans to cut the news staff 10 percent this year.

Avista Capital Partners. The New York private-equity firm and its partners will make a bid, a member of the group, former Knight Ridder executive Christopher M. Harte, confirmed. Avista, which is run by former Credit Suisse investment bankers, counts Royal Bank of Scotland among its allies.

Avista media group leader James Finkelstein headed its team of visitors to Philadelphia. He has declined to comment. Harte is recalled by colleagues as a spirited but cost-conscious newsman. Currently a private investor, he has also dabbled in Democratic politics in Maine.

Yucaipa Cos. The Los Angeles private-equity firm headed by Ronald W. Burkle is best known for buying and selling supermarket chains; since 2000, Burkle has used state, corporate and union pension-fund cash to diversify into airlines, online entertainment and other areas, although his funds have cashed in only modest profits so far.

An active donor to national Democratic and some Republican politicians, Burkle has cultivated a reputation as a union-friendly boss in an effort to distinguish his firm in the crowded private-equity field. Yucaipa’s bid has the support of the Newspaper Guild labor union.

Yucaipa visited Philadelphia at least twice, bringing managing directors from Bear Stearns & Co. Inc. and SunTrust Robinson Humphrey Capital Markets. Ira Tochner, Burkle’s second-in-command, joined former Inquirer and Daily News publisher Robert C. Hall, a Yucaipa consultant, on the second visit last week.

Philadelphia Media Holdings L.L.C. Advertising and public-relations entrepreneur Brian P. Tierney recruited investor Bruce E. Toll, former Hamilton Lane Advisors chairman Leslie Brun, former Inquirer publisher Sam McKeel, and local corporate executives, bankers and venture capitalists in a bid to place the newspapers in local hands.

Tierney has said his group has the power to outlast out-of-town investors because it is not looking for short-term profit.

Daily News L.P. New York Daily News owner Mortimer B. Zuckerman, who made his fortune from his publicly traded commercial real estate company, Boston Properties Inc., sent a delegation headed by Daily News chief executive officer Marc Z. Kramer to visit the newspapers’ newsrooms and their printing plant.

Like the other visitors, the Daily News also signed a confidentiality agreement and expects to make a bid.

Unlike other visitors, the News crowd brought no outside financial experts. Zuckerman will not say what he would do with the newspapers. He also owns the weekly U.S. News & World Report in Washington.

Zuckerman’s current publications, which feature his opinion columns, are known for their centrist politics on domestic issues combined with staunch support for Israel.

Onex Corp. Chairman Gerald W. Schwartz told investors last week that his publicly traded but closely held private-equity company in Toronto had more cash than it had been able to profitably invest _ and that many U.S. newspapers would be more profitable if they were better managed.

Managing director Seth M. Mersky showed how Onex might put those management theories into practice last month when he asked local Teamsters union leaders to agree not to intervene if Onex took over the newspapers and made deep cuts to newsroom staffing levels. The Teamsters said they refused.

Onex officials were joined by David Black, whose Black Press Ltd. newspaper chain covers most of British Columbia, Hawaii and part of Washington State. Wachovia Bank also sent a high-ranking team.

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