This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Arbs Lay Off Knight-Ridder

Is Knight Ridder (KRI) a good merger arbitrage play? Several traders at hedge funds doubt the deal will materialize and say they're in no hurry to take a bet.

Shares of the newspaper publisher rose 1% to $60.93 Thursday after The Wall Street Journal reported that three private equity firms, Blackstone Group, Providence Equity Partners and Kohlberg Kravis Roberts, were considering a joint bid for the company.

The muted reaction partly reflects Knight-Ridder's 15% run since late October, when several large shareholders started agitating for a sale of the company. But the current price is 13% below the 52-week high of just below $70, hit in early March.

For now, merger arbitragers, who bet on takeovers, aren't embracing the stock, which presumably would be taken out for a price above the current level.

"I don't like to play pre-deals. It's too risky," says Nancy Havens, founder of merger arbitrage hedge fund Havens Advisors. "If the market goes down, you go down twice as much. We [previously] did it with a fantastic franchise, Gatorade. But here, I would need to see bidders really stepping in."

Haven says she has not ruled out buying the stock, but not until the stories are confirmed. "I think there is accuracy in the rumor. But it's just rumors."

All that is known for sure, another hedge fund manager says, is that Knight Ridder announced last month that it was exploring the possibility of selling the company and that it had hired Goldman Sachs as its adviser. Even after that news, which followed the shareholder comments, the stock rose just 23 cents to $63.10. And since then, it has moved downward. "I am not buying the stock," this manager says.

"We think a deal gets done, but it could take a long time to unfold," says William Drewry, a Credit Suisse First Boston analyst in a research report, who is neutral on the stock.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,953.92 -129.88 -0.76%
S&P 500 1,977.24 -10.74 -0.54%
NASDAQ 4,447.0890 -25.0190 -0.56%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs