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Philadelphia papers sold for $562 million

PHILADELPHIA -- McClatchy Co. is selling the Philadelphia Inquirer and the Philadelphia Daily News for $562 million to a group of local investors who hope to reverse circulation declines by emphasizing local news and doing more with the Internet.

The two papers are being bought by a group led by advertising executive Brian Tierney and Bruce Toll, cofounder of home builder Toll Brothers Inc. The papers are currently owned by Knight Ridder Inc. and are among 12 that McClatchy doesn't plan to keep once it completes its purchase of the rest of the company.

McClatchy and the investor group said they intend to complete the deal around the same time that McClatchy closes its deal for Knight Ridder, which is expected this summer. McClatchy will receive $515 million cash, and the investment group, Philadelphia Media Holdings, will assume $47 million in pension liabilities.

Once McClatchy closes its purchase of Knight Ridder's remaining 20 papers, it will become the second-largest newspaper company in the country following Gannett Co.

The sale of the two papers is part of McClatchy's plan to divest 12 of 32 newspapers it bought from Knight Ridder for about $4.5 billion plus the assumption of $2 billion of debt.

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