Tuesday, November 22, 2005

Another View of the Knight Ridder Sale

My friend Mr. M emails as follows:

....I am not sure I totally agree with (your column on Knight Ridder). In fact, I think there is a certain amount of remaining value in Knight Ridder -- and the rest of the dinosaur newspapers.

KR throws off about $700MM in cash. Aggressively, one could probably take out about $300MM in costs, primarily in sales & admin, but also in layers and layers of editors and reporters who cover the same thing over and over, so you could probably remain with a company that throws off about $1B in cash, for at least a few more years. On top of that, the web sites leverage actually good brands, Miami Herald, Inquirer, etc. that could probably be organized into a growth business that will be successful, though they won't be yahoo.

I am actually surprised that the private equity folks aren't taking a more solid look at KRI.
Even if one assumes the business declines at 10% per year, one could create about 8-10B of value which would more than make today's shareholders ($4.B) and today's bond holder ($2B) happy and leave a little something for the risk taker.