Barricade the windows!

Somewhat lost in the hubub over the announcement of Knight Ridder’s sale earlier this week is the money to be made by the man who started it all: Bruce Sherman.

Sherman, you see, started this whole sell-Knight Ridder crazy when the company’s largest shareholder said the company was underperforming and urging the board to sell itself. Sherman is the CEO of Legg Mason’s Private Capital Management LP. And, he did this only a few months after Sherman’s company became the majority stockholder.

I don’t quite understand how that works, but I do understand that it’s funny when it doesn’t quite work out:

On Monday, Sherman apparently got his wish when McClatchy announced it would buy Knight Ridder, the nation’s second-largest newspaper company and owner of the Mercury News.

But the price — $67.25 a share in the $4.5 billion deal — is well below historic premiums paid for newspapers. And it means that for all his trouble, Sherman — who paid an average of $65 a share for his stock — will barely break even on his Knight Ridder investment.

Even that modest victory is not assured because Sherman and other shareholders will be paid with a mix of cash and McClatchy stock, which has fallen 3.8 percent since the deal was announced. In addition, Sherman has seen his sizable McClatchy holdings lose $55.6 million in value since the beginning of the year when the company emerged as a bidder for Knight Ridder…. interest turned out to be tepid, with only two bids ultimately submitted. And the price paid by McClatchy was 10.4 EBITDA — what Merrill Lynch’s Fine termed “well below historical… multiples.”

There was an article a while back that said Sherman was trying to unload the stock in order to meet certain growth targets by Aug. 1, 2006. With that selling price, Sherman better get off his gold-plated toilet (note: he may not have a gold-plated toilet) and get to work.

KR Sale: Mixed result for investor [San Jose Mercury-News]