The McClatchy Co., parent of The News & Observer, will buy rival Knight Ridder Inc. for $6.5 billion to become the nation's second-largest newspaper publisher.

The Sacramento, Calif.-based company will pay $4.5 billion in cash and stock, or $67.25 a share, and assume $2 billion in Knight Ridder debt. The transaction gives McClatchy control of North Carolina's two largest and most influential newspapers -- The N&O and The Charlotte Observer.

McClatchy will sell 12 Knight Ridder newspapers that don't fit with its business model, including The Philadelphia Inquirer and San Jose Mercury News.

When the deal is complete, expected within four months, McClatchy will own 32 daily newspapers with a combined daily circulation of 3.2 million.

"Opportunities like this come along once in a company's lifetime," McClatchy Chief Executive Gary Pruitt said on a conference call with analysts and reporters. "The stakes have never been higher for newspapers and journalism than they are today" and McClatchy wants the strongest company it can create.

Indeed, the McClatchy purchase is seen by some as a referendum on U.S. media and journalism. McClatchy's willingness to buy shows that somebody is willing to bet on the newspaper business.

The Internet and changes in consumer behavior has roiled the newspaper industry, siphoning away readers and advertisers who used to count on the printed page.

"Pessimism about our industry is indeed widespread these days, but we believe it is misinformed," Pruitt said on the call. "We believe in newspapers both as a necessary foundation of democracy and as a good business."

Reaction to the deal was positive. "It's always sad to see one company bought by another," said Richard Cole, dean emeritus of the School of Journalism at the University of North Carolina at Chapel Hill. "But I'm glad it was McClatchy because it's a splendid company and will serve the public well."

McClatchy has a plan to trim about $60 million in costs after buying Knight Ridder, mostly by eliminating Knight Ridder headquarters staff and redundancies in the online businesses of the two companies. Pruitt said he has no plans for across-the-board layoffs at any of the newspapers.