S.F. Chronicle stirs speculation

By: Lucia Moses Rumors abound again over possible sale of daily to rival Examiner

The company that publishes the San Francisco Chronicle has hired an investment banking firm to evaluate its holdings, rekindling speculation that it will sell all or part of the company and putting employees on edge.
The Chronicle Publishing Co. released a terse statement saying it hired Donaldson, Lufkin & Jenrette of New York to evaluate its financial, business and strategic plans. Chronicle Publishing chief executive John Sias would not comment further on the announcement.
Several industry analysts and observers say that hiring an investment banking firm usually means the company plans to sell part or all of its assets. "They are putting up a 'For Sale' sign," says one former Chronicle columnist. "When you bring in anyone to go over the books, you're saying, 'Tell us what we're worth, find someone who might be interested, and tell us the price'." Some employees say this rumor, unlike ones before it, seems to have more weight.
In addition to the Chronicle, family-owned Chronicle Publishing owns two other papers, the Bloomington, Ill., Pantagraph and the Worcester, Mass., Telegram & Gazette. It also has three television stations: KRON in San Francisco; KAKE in Wichita, Kan.; and WOWT in Omaha, Neb. Other properties are Chronicle Books; MBI, a Wisconsin book publisher; and cable news channel BayTV. Chronicle Publishing and its joint operating agreement partner, the San Francisco Examiner, jointly own SFGate, a Bay-area information service. The company employs about 3,200 in all.
Over the years, the Chronicle and Examiner have been the subject of rumors that one will buy out the other or that the two will merge. In the often-cited scenario, Examiner parent Hearst Corp., which has first crack at buying the Chronicle, would buy its competitor and shut it down.
Hearst vice president and general manager George Irish declined to comment for this story. In the past, Hearst has steadfastly denied any intentions of folding the 133-year-old Examiner, its first newspaper.
Under the joint operating agreement, which was signed in 1965 and expires in 2005, the two papers operate separate newsrooms and share other operations such as printing, circulation, and advertising, splitting revenues evenly. The Chronicle publishes in the morning, the Examiner in the afternoon. The two put out a joint Sunday edition.
Both papers are losing circulation. In the past decade, the Chronicle's weekday circulation fell 15.3% to 475,000 from 561,000. while the Examiner's weekday circulation fell 19.5% to 111,000 from 138,000, according to the Audit Bureau of Circulations. The combined Sunday Examiner-Chronicle's circulation fell 18.4% to 592,000 from 726,000 in the same period.
"You can make a lot more money publishing one newspaper in a community than two," says John Morton, a Silver Spring, Md.-based newspaper analyst.
The Chronicle was founded in 1865 by the de Young family, whose descendants still own the parent company. A 10-member board of directors consisting of five family members and five non-family members runs the company. Over the years, relatives have disagreed on whether to sell off parts of the company and have increasingly relied on outside managers to run the business. Until recently, a majority of shareholders favored keeping the company together, but that coalition has since broken down.
The privately-held Chronicle Publishing doesn't disclose its finances. Morton says using common circulation multiples, the Chronicle could command $400 million to $1 billion. Generally, high prices paid for newspapers these days make it a good time to sell.
On the plus side, the large amount of national advertising that the Examiner and Chronicle get would make the Chronicle more attractive to an outside buyer. (National ads account for 28% of overall ad revenue). On the other hand, the JOA profit split and competition from the Examiner and surrounding papers would tend to lower the price, Morton says.
Having been told little about the announcement, employees at both newspapers are left to speculate. Chronicle executive editor Matthew Wilson says the hiring of DLJ could suggest a possible sale. Addressing the newsroom May 10, he advised staffers to stay focused on putting out the paper. Lingering questions concern whether the union contracts would apply in the event of a sale, if pensions would be affected, and how layoffs would be done, should one of the papers fold. Editorial, ad, and clerical staffs at both papers and craftspeople for joint operations are covered by several bargaining units.
While all the answers aren't known, union officials say they're confident that the union contracts would apply if the paper is sold, although employment isn't guaranteed. The contracts expire in 2005, but either side may seek to renegotiate the contracts during an opt-out period in early 2001, says Doug Cuthbertson, executive officer of the Northern California Media Workers, which has members at both papers.
Cuthbertson says Chronicle employees wonder if there will be a repeat of San Antonio, Texas, if Hearst buys the Chronicle. Hearst bought the San Antonio Express-News from Rupert Murdoch's News Corp. Ltd. in 1993 and folded its own paper, the San Antonio Light. Under the sale agreement, Hearst offered continued employment to all Express-News staffers but laid off all the Light's employees.
Concerned that one of the papers would eventually close, Chronicle and Examiner employees won additional severance payments in the 1994 contract in case of layoffs due to a merger but were unable to get an agreement on a layoff procedure.
Larry D. Hatfield, vice president of the Northern California Media Workers Guild, which represents about 200 editorial and clerical workers at the Examiner, says he's skeptical about the latest rumors, having heard many in his 30 years at the Examiner.
"This one seems to be a little more concrete because they seem to be moving into position to sell the paper or the whole property," Hatfield says, "but who knows?"
Some observers are taking a wait-and-see attitude, noting that the company has sought outside advice before, in 1992 and 1997.
"We're very accustomed to rumors and stories, and it gets to the point where, after a while, you sort of become immune to it," says Steven Falk, president and CEO of the San Francisco Newspaper Agency, which handles shared operations for the JOA.

Recent record prices paid for independent newspapers
? Minneapolis Star Tribune,
$1.2 billion, by McClatchy Co., 1998
? The Boston Globe,
$1.1 billion, by New York Times Co., 1993
? Houston Chronicle,
$415 million, by Hearst Corp., 1987
? Baltimore Sun,
$400 million, by Times Mirror Co., 1986
? Louisville Courier-Journal and Times,
$319 million, by Gannett Co., 1986
Source: Dirks, Van Essen & Associates

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?(copyright: Editor & Publisher May 15, 1999) [Caption & Photo]