A Dolphin Swallowing a Small Whale

In a move one analyst compared to a “dolphin swallowing a small whale,” McClatchy Co. has agreed to purchase Knight-Ridder, publisher of 32 newspapers across the country. The acquisition creates the nation’s second-largest newspaper chain.

The analyst comment references the size of the two companies: In 2005, McClatchy had less than half the revenue of Knight-Ridder – and Knight-Ridder owns almost three times as many dailies. It’s a bold, gutsy move by McClatchy.

For three Knight-Ridder newspapers in our region, however, the future remains highly uncertain. The Grand Forks Herald, Duluth News-Tribune and St. Paul Pioneer Press are among 12 newspapers McClatchy intends to immediately sell. (McClatchy, which also owns the Star Tribune of Minneapolis, would’ve likely faced federal anti-trust concerns for owning two major dailies in the same market.) Knight-Ridder’s largest union has proposed buying nine Knight-Ridder papers, including the Pioneer Press, but other suitors may emerge.

Market perceptions are fascinating. Most Knight-Ridder properties have a profit margin in the 15-20% range – excellent in many industries, but not enough to satisfy major Knight-Ridder shareholders who pushed for the sale. Hopefully Grand Forks, Duluth and St. Paul will find a buyer (or buyers) focused on balancing profits with quality journalism. Employees (including friends in those newsrooms) undoubtedly face more transition and anxiety in the coming weeks and months.

Head over to Poynter Online for some good coverage.