Knight-Ridder Inc. announced on April 4, 1997, that it had decided to divest Knight-Ridder Information Inc. (KRI), its online information service that includes DIALOG and DataStar. The decision came as part of an agreement with the Walt Disney Company to purchase four newspapers owned by ABC, Inc., a Disney subsidiary. Knight-Ridder expects to complete the sale during 1997.
The purchase of the four newspapers cost an estimated $1.65 billion. The newspapers Knight-Ridder bought were the Kansas City Star (circulation 291,000 daily and 424,000 Sunday; available online with DataTimes, Dow Jones News/Retrieval, Nexis, and on its Web site at www.kcstar.com); the Fort Worth and Arlington Star-Telegrams (combined circulation of 240,000 daily and 342,000 Sunday; available online on DataTimes, Dow Jones News/ Retrieval, Nexis, and on its Web site at www.startext.net); the Belleville (IL) News-Democrat (circulation 51,000 daily and 62,000 Sunday); and Wilkes-Barre, PA Times Leader (circulation 48,000 daily and 70,000 Sunday; available on its Web site at www.leader.net).
In announcing the move, Knight-Ridder indicated that they had decided to re-focus on their core newspaper business, the foundation of the company. Knight-Ridder publishes 31 daily newspapers in the United States, including the Philadelphia Inquirer, the Miami Herald, and the San Jose Mercury News. Anthony Ridder, chairman and CEO, pointed particularly to the Kansas City and Fort Worth papers as "models of locally edited, reader-friendly and marketing savvy publications. Both evidence strong online literacy as well. All of these are critical qualities in today's competitive environment and they bring with them accomplished management teams that will offer fresh and valuable insights to Knight-Ridder."
Knight-Ridder had already started divesting itself of online business information services last year when it sold the Knight-Ridder Financial news service. Although the company claimed to retain its commitment to the rest of Business Information Services, analysts think that the arrival of attractive opportunities for more newspapers completed the strategic withdrawal from online services. Knight-Ridder also recently got rid of their stake in a cable television venture. CEO Ridder claimed that he wished they could have held on to KRI, but they needed the sale to maintain the parent company's credit ratings.
Who May Buy?
Currently KRI includes some 600 employees in the United States, most in the California headquarters, but others in some 51 regional offices. The company also has over 125 people outside the United States, most with DataStar offices in London and Bern, Switzerland, as well as affiliate arrangements in 37 countries.
When Knight-Ridder bought Dialog in July 1988 from Lockheed Corporation, they paid an estimated $350 million. Since then KIR has also purchased DataStar (1993) and CARL Corporation. However, analysts estimate that KRI will fetch between $400 to $500 million, and some commentators think the price may go lower than that. Goldman Sachs will handle the divestiture as it did the sale in 1988.
Rumors are rife about possible buyers. Among suggested services are publishing giants like Reed-Elsevier (owner of LEXIS-NEXIS), Thomson, ADP, IBM, OCLC, EBSCO, and even Chemical Abstracts Service. Some have even suggested a consortium of investors or even a combination of employees and large consumers. Several analysts with whom we spoke estimated that the earnings at KRI -- or should we call it DIALOG again? -- have gone flat over the last few years. However, another commentator pointed out that earnings and growth must balance against acquisition costs. Roger Summit, founder of DIALOG, hoped whoever purchased …