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Burkle Backs Union's Bid for 9 Papers

February 16, 2006|Joseph Menn | Times Staff Writer

Los Angeles supermarket magnate Ron Burkle, stung by some of his Internet investments during the dot-com bust, now wants to place a bet on old media.

Burkle's Yucaipa Cos. said Wednesday that it would provide financial backing for an upstart campaign by Knight Ridder Inc. employees to buy nine of their company's newspapers.

The alliance with Burkle, best known for buying and selling West Coast supermarket chains such as Ralphs, gave new life to the union-led buyout effort, which had been given little chance of success.

Burkle's dot-com era bets on file-sharing network Scour.com and electronic retailer Checkout.com flamed out, and he more recently invested in Al Gore's fledgling cable TV network.

A major Democratic fundraiser, Burkle also has a history of working with organized labor, according to union officials. Union pension funds like the California Public Employees' Retirement System, meanwhile, invest in Yucaipa.

Since San Jose-based Knight Ridder put itself up for sale late last year, the Newspaper Guild-Communications Workers of America has been seeking partners to help employees bid for the San Jose Mercury News, Monterey County Herald, Philadelphia Inquirer and six other unionized papers, which account for about 15% of the company's total circulation of 8.5 million.

Knight Ridder has said it would only entertain offers for the whole company, which owns 32 newspapers. The union acknowledged that stance Wednesday, but pitched itself as a useful partner for any company planning to bid for all of Knight Ridder. For example, a buyer needing to sell some of the Knight Ridder properties to satisfy antitrust concerns could sell them to the union.

The union's financial advisors also say that if the employees use their pensions to buy some of the papers, the new company could pay little or no income taxes. In addition, union leaders say giving employees a stake in the businesses would provide a more enthusiastic workforce.

"There is no guarantee that our interest in preserving the union properties will be taken up" by the winning bidder, union President Linda Foley said in a joint statement with Burkle. "But at the very least, with Yucaipa's critical support, we should be seen as an attractive partner."

Neither the union nor Yucaipa would provide details of how their partnership would be structured.

Knight Ridder declined to comment.

The three known bidders interested in all of Knight Ridder include an alliance between Gannett Co. and MediaNews Group Inc., as well as two groups of private investment firms.

Sacramento Bee owner McClatchy Co. also is interested, but is believed to need a partner. All bidders declined to comment.

Burkle and the union said they believed that newspapers still have great potential, even though shares of Knight Ridder and other media companies have been battered as readers get news free online. Major papers have responded by cutting staff, which some on Wall Street see as long overdue and others see as worsening the problem.

Burkle, 53, is a director of Yahoo, the Internet giant that has cut into Knight Ridder's readership. Last year, Forbes estimated his worth at $2.3 billion.

Knight Ridder's stock rose 72 cents to $63.34 on Wednesday.

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