Newspaper publishing company Mc-Clatchy Company will buy Knight Ridder Incorporated, the second-largest newspaper company in the country, for about $4.5 billion in cash and stock, the New York Times reported yesterday night. Knight Ridder had been forced to put itself up for sale by its largest shareholders, who were frustrated with its stock performance.

The Times, citing unidentified people involved in the negotiations, said Knight Ridder agreed last night to the deal, which was expected to be announced today.

McClatchy is based in Sacramento, Calif., where it publishes the Sacramento Bee and 11 other newspapers, including the Fresno Bee and the News & Observer in Raleigh, N.C. San Jose, Calif.-based Knight Ridder which has 32 daily newspapers, including the Miami Herald and the San Jose Mercury News.

McClatchy has punched above its weight before, sealing a $1.4 billion deal in 1997 to acquire the Cowles Media Company, the parent company of the Star Tribune in Minneapolis. This deal, however, represents a much bigger bite for the company and its highly regarded chief executive, Gary Pruitt.

While McClatchy is smaller than Knight Ridder, it has a strong balance sheet and is admired for both its business acumen as well as its commitment to quality journalism. McClatchy had long bucked an industry trend of circulation losses, posting annual gains in circulation for 20 years in a streak that finally ended last year.

Acquiring Knight Ridder would mark a break from McClatchy’s usual pattern of investing in growing markets. Knight Ridder’s papers in both San Jose and Philadelphia have both struggled in recent years.

McClatchy beat out a rival bid from a consortium of private-equity buyout firms that included Texas Pacific Group, Bain Capital, Thomas H. Lee Partners, Hellman & Friedman, and Oak Hill Partners.

Industry leader Gannett Company and MediaNews Group Incorporated, a privately held newspaper publisher based in Denver, had also been interested.

McClatchy agreed to pay about $67 a share for Knight Ridder, with 60% of the payment in cash and the rest in Mc-Clatchy shares, the Times reported. Knight Ridder shares closed at $65 in heavy trading Friday on the New York Stock Exchange. Messages left by the Associated Press with spokespeople for Knight Ridder and McClatchy were not immediately returned last night.

The deal would strengthen Mc-Clatchy’s presence in its home state of California by adding the Mercury News, although that paper has struggled recently and has a profit margin of only 8%, according to industry analyst Doug Arthur of Morgan Stanley. The industry average is 20%.