On November 14, Knight-Ridder Inc., announced that it would put it itself up for sale, and retained Goldman Sachs to advise it. Based in San Jose, the company owns 32 daily newspapers, including the Philadelphia Inquirer, San Jose Mercury News, Miami Herald, Kansas City Star, Charlotte Observer, Akron Beacon-Journal, Idaho Statesman, and Duluth News Tribune. Total circulation is 8.5 million daily and 11 million Sundays, and it runs a well-regarded Washington bureau with about 40 employees.
Knight-Ridder was put in play on Nov. 1 when the head of Private Capital Management, a Florida investment firm and KRI's largest shareholder, wrote a letter to the board demanding a break up or sale. No buyers have emerged yet, and management has warned employees to expect a period of high uncertainty. On Nov. 18 a long list of former journalists and executives at Knight-Ridder published an open letter to the board saying the company had been mismanaged, and vowing to run its own slate of directors at the next shareholders' meeting. (See Rem Rieder on it, and the firm's response.)
Here is my own solution: a community buyback plan, explained in these eleven points. I am told it's impossible and will never happen. And that's probably true. But no one has any better ideas, so here goes...
* Knight-Ridder announces that rather than sell to another big company or get bought, it has another plan: to break itself up. It will sell all 32 newspapers it owns to local buyers who will pay a premium for the opportunity to own the local daily. If no such buyers are found to exist, there is no transaction. The plan is called the Main Street Strategy to distinguish it from Wall Street thinking.
* The goal of the plan is to maximize shareholder value. That means a total price equal to or better than what shareholders could be expected to realize from any of the options commonly talked about today in the industry and the press: takeover by another newspaper company, purchase by a private equity firm, or cutting quality further in order to halt the erosion in market share (the current strategy.) A second goal is to improve the probability that quality journalism will happen in the future in the 31 towns where Knight-Ridder operates newspapers.
* The strategy contends that local ownership is most likely to pay a premium price for each property, and also more likely to invest in quality down the road. To the plan's doubters one answer is: what strategy do you have for getting a premium price? If the Main Street plan works to perfection, all 32 newspapers would be sold to qualified local owners at a "market plus" rate. Perfection being rare in life, there will be a number--18, 21, 27-- and a price where it makes sense to sell what you can to local buyers, and package the rest for disposal by Wall Street.
* It all happens during a highly unusual (and therefore compelling) 90-day sale period, during which Knight-Ridder turns over to each newspaper, led by its publisher, the job of announcing the sale, drawing attention to it as a unique and newsworthy event, identifying possible buyers in the community, and evaluating their chances of success. Publishers are directed to use everything at their disposal to find one or more qualified purchasers likely to bargain in good faith with Knight-Ridder, and succeed with the newspaper down the road. Publishers vet and forward local candidates who are ready to make an offer.
* Editors work closely with the publisher in a coordinated campaign to search out every possibility and bring the best possible information to bear on the sale. They are expected to turn their newspapers and websites into open forums where the town can discuss: what do we want from our local newspaper? what does it take to run it and make it great? who among us wants to own it? what would happen if they did?
* Each of Knight-Ridder's 32 newsrooms is handed a local story with built-in suspense (will anyone step up?) and they are to use everything at their disposal--news reports, features, investigations, charts, editorials, columns, blogs--to engage the community in it. But they also have to make the newspaper's actions transparent, provide full information to all, and hold key players accountable. They are told to bring the full powers of their creativity, and all knowledge they have of the community to the task. They have 90 days to be what they have never been under Knight-Ridder: agents of their own destiny.
* Because of the extraordinary civic circumstances ("Akron, Ohio, your newspaper will be returned to you, if...") the normal rules against taking up causes are suspended for purposes of finding a qualfied buyer with a civic conscience. Which is simply to say: every employee, including every journalist, is directed to assist in maximizing shareholder value by finding local buyers who will pay a premium price and operate responsible newspapers in the best traditions of Knight-Ridder and its history.
* "Buyers" means any combination of players--profit or non-profit, individual or institution--that may arise and come up with the purchase price, including: rich person, publishing family, local foundation, educational institution, investment group, community trust, five friends with enough money to do it, or some novel combination we cannot anticipate.
* Among the possible bidders will be people who would be a disaster for one reason or another, and leave the community and the newspaper worse off. Every town has its George Steinbrenner. For that reason, and to get newsroom buy in for the unusual effort required by the sale period, the editor must sign off on any qualified buyer forwarded by the publisher to Knight-Ridder. It's a newsroom veto.
* Shareholders expecting what Wall Street expects--margins of 20 percent and higher--are to be exchanged, in the Main Street Strategy, for owners who understand that at 10 percent newspapers can have excellence and longevity and make money. When critics ask: why would local owners succeed any better than current management? the answer is: they can succeed at 10 percent; Knight-Ridder executives could not.