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Not just bad — the worst

August 19th, 2010

McClatchy Co., owner of the News & Observer, popped up in the news twice in recent days. In the first instance, the company was featured in a report by Bloomberg, in which the 100 biggest merger and acquisition deals from 2005-08 were examined. Bloomberg’s conclusion?

More than half of the 100 biggest takeovers made during the last mergers-and-acquisitions boom have something in common: By one measure, they never should have happened.

…Among the worst performers were McClatchy Co., Boston Scientific Corp., and Sprint Nextel Corp., all three of which are now valued at less than the price they paid for their acquisitions.

How bad was McClatchy’s deal? Awful. Wretched. Without peer when it comes to bad result, according to Bloomberg:

McClatchy’s purchase of the Knight Ridder Inc. newspaper chain, for $4.1 billion in 2006, ranked the worst of the 100 on Bloomberg’s list, with McClatchy shares underperforming the Bloomberg Advertising Age AdMarket 50 Index by 93 percentage points. Sacramento, California-based McClatchy borrowed cash to buy the chain as newspaper real-estate advertising plunged.

In the second instance, McClatchy was featured when hedge fund manager John Paulson’s latest filing with federal regulators showed he’d acquired a substantial chunk of McClatchy stock — five million shares, purchased at a cost of $18.2 million. A quick exercise in math tells me Paulson paid, on average, $3.66 a share.

As of this writing, McClatchy is trading at an $2.92 a share. That means Paulson’s hedge fund has lost $3.7 million of its investment in McClatchy. Maybe I’m just a country boy, but that feels like real money.