Chronicle of a sale foretold

By: Lucia Moses

Chronicle of a sale foretold
CEO’s heir apparent resigns in face of ‘uncertain future’

The Chronicle Publishing Co.’s chief financial officer, Alan Nichols Jr., resigned amid speculation of a sale of all or part of the company, which publishes the San Francisco Chronicle.
Nichols announced his departure two weeks after Chronicle Publishing announced it hired an investment bank to conduct a review, fueling speculation of a possible sale of all or part of the company. He plans to head Geocast, a startup Silicon Valley company that is working on providing full-motion video on the Internet.
Nichols, 39, who was seen as the successor to chief executive John Sias, 72, says he had looked forward to leading the company, but that the chance to work in the Internet field, plus the “uncertain future” of Chronicle Publishing, helped make his decision.
Hired in 1993, Nichols is credited with overseeing the launch of SFGate, the online service of the Chronicle and its joint operating agreement (JOA) partner, the San Francisco Examiner, and leading the company out of debt. He will be succeeded June 1 by Martin A. Jaffe, currently vice president of corporate development and business affairs.
“It’s an unsettling environment around here,” says Carl Hall, a Chronicle reporter and president of the New California Media Workers Guild/Typographical Union, which represents editorial and clerical workers at both papers. “When you lose the heir-apparent CEO, it doesn’t exactly calm the waters.”
Larry Hatfield, vice president of the guild, says, “I did talk to a couple of people at the Chronicle, and they saw it as an unsettling move. If he jumps ship, it probably underscores” the likelihood of a sale.
The hiring of the investment banking firm Donaldson, Lufkin & Jenrette is widely viewed as the first step toward selling the Chronicle. Many observers believe the most likely buyer would be the Hearst Corp., which owns the Examiner and has first crack at buying the Chronicle under the JOA.
The papers maintain separate newsrooms, but share business operations and profits under the government-sanctioned JOA, which expires in 2005.
Chronicle Publishing is owned by descendants of the 134-year-old paper’s founders. Over the years, the owners have brought in financial advisers, which has led to the hiring of outside managers to run the company.
Nichols says while Chronicle Publishing has a valuable asset in owning a newspaper, television station, and Internet site in a single market, he can see why shareholders might consider a sale, as he says they are clearly doing. “I understand the other side, which is maximizing the investment they’ve got,” he says, noting the high prices paid for media companies today.
Analysts say there would be a lot of interest in the Chronicle, as well as the parent company’s NBC affiliate KRON-TV in San Francisco, the fifth-largest media market in the United States.
Chronicle Publishing also owns two other newspapers, The (Bloomington, Ill.) Pantagraph and the Worcester, Mass. Telegram & Gazette; two other television stations; two publishing houses; a cable news channel; and SFGate. It employs about 3,200 people in all.
Employees at the papers and observers worry that if Hearst buys the Chronicle, it will merge the papers, causing layoffs and diminishing competition. Nichols offers a different view, saying there would still be plenty of media outlets, both electronic and newspaper, in the San Francisco market. “I don’t think going to one paper is bad for competition.”
Now would be a good time to cash in, with newspapers and television stations commanding high prices, and few big independently owned newspapers left to buy.
Nan Tucker McEvoy, the family matriarch of the Chronicle Publishing shareholders, has staunchly opposed selling the company, but she was ousted from the board of directors in 1995, and other family members are said to be less interested in keeping the company together. In 1996, the company sold its cable division for $580 million to Tele-Communications Inc. to help reduce its debt load.
Sources look for a development in mid June, when Donaldson, Lufkin & Jenrette is expected to produce a report.
?(Editor & Publisher Web [Caption]
?(copyright: Editor & Publisher May 29, 1999) [Caption]

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