Two groups of private investment firms that have been weighing takeover offers for newspaper chain Knight Ridder Inc. appear to be fading as serious contenders for the San Jose-based company.
A group made up of Kohlberg Kravis Roberts & Co., Blackstone Group and Providence Equity Partners and a second composed of Bain Capital, Hellman & Friedman, Thomas H. Lee Partners and Texas Pacific Group are unlikely to make bids much above Knight Ridder's current stock price, people familiar with the parties said Friday.
Bids at or near the current price aren't likely to be acceptable to Knight Ridder, the sources said.
Knight Ridder declined to comment, and representatives of the investment firms declined to comment or didn't return calls. Reuters reported that the Kohlberg Kravis group had decided to pull out of the bidding, but that couldn't be confirmed.
The investment groups were among four known bidders for Knight Ridder, which put itself up for sale in November under pressure from disgruntled shareholders.
The next round of bids are due Thursday.
Still in the running are McClatchy Co., which owns the Bee newspapers, and an alliance including Dean Singleton's MediaNews Group Inc. and Gannett Co., the only U.S. chain with a larger combined circulation than Knight Ridder.
Knight Ridder owns 32 daily newspapers, including the San Jose Mercury News and the Miami Herald.
Analysts said the investment firms might be losing interest because, as non-newspaper companies, they wouldn't be able to combine corporate jobs with those of an existing news operation -- removing a potential source of cost cutting. They also said tax laws would make it difficult for the firms to resell pieces of the company for a substantial profit.
If MediaNews and Gannett acquire Knight Ridder, they are expected to divvy up the chain's papers, with MediaNews theoretically taking more of the large papers, Morgan Stanley analyst Doug Arthur said. McClatchy might be less aggressive than the others in cutting costs if it wins, industry analyst John Morton said.
In either of those scenarios, the changes are likely to be less abrupt than they would be under the ownership of a private investment firm, Arthur said.
The reluctance of the private investors to make strong bids would give the Knight Ridder board more leeway to reject all buyout offers. Instead, the company might buy back much of its public shares or combine its operations with McClatchy in a stock merger, analysts said.
