The Houston Chronicle, Texas’ largest daily newspaper, was sold to the Hearst Corp. on Thursday for $400 million, making it one of the most expensive newspaper purchases in history.
The announcement, which had been rumored for more than a week, was made jointly by Frank A. Bennack Jr., president and chief executive of Hearst, and Richard J. V. Johnson, president and publisher of the Chronicle. Hearst owns 14 newspapers, including the Los Angeles Herald Examiner and the San Francisco Examiner.
The sale ends the Chronicle’s association with the nonprofit Houston Endowment and its strong links to the city’s business leaders, many of whom were on the organization’s board. By law, the newspaper’s profits were used for charitable purposes, and the paper gave away millions of dollars each year to hospitals, colleges and other causes.
The endowment was created by Jesse H. Jones, the last individual owner of the paper. When he died in 1956, most of the assets of his banking and business empire, including the Chronicle, were placed in the charitable trust.
The endowment’s sale of the Chronicle was inevitable, because a 1969 federal law gave the foundation 20 years to divest itself of the newspaper. The law restricted ownership of commercial businesses by nonprofit corporations.
Over the years, various Texas politicians tried to attach riders to bills exempting the Chronicle from the 1969 law, contending that it would mean loss of local control. The Senate approved such bills three times, but they died in House committees.
In recent weeks, rumors that a sale was imminent circulated throughout the paper’s staff, with the two leading contenders as purchasers being Hearst and the New York Times Co.
“I’m just very pleased to see the Chronicle go to such a fine organization as the Hearst Corp.,” said Philip G. Warner, the newspaper’s vice president and editor in chief.
Bannack said, “This paper has achieved its present stature as the largest newspaper in Texas because of its commitment to excellence and its service to the Houston area.” The Chronicle, however, has been accused in the past of pandering to the business community and of not running stories that seemed detrimental to business.
Sources within the Chronicle said there are no immediate plans for any management changes. The terms of the agreement call for a payment of $300 million in cash and $100 million in notes. The deal is expected to be completed by May.
The Chronicle has a daily circulation of 425,434--the largest in Texas--and is in second place on Sundays with 528,153. The Dallas Morning News has 531,417 on Sundays but only 390,987 daily.
The Chronicle is the largest acquisition so far by the Hearst Corp., and John Morton of Morton Research in Washington and an adviser to the Houston Endowment during the negotiations, said late Thursday that the deal appears to be sound.
“A newspaper in the Chronicle’s position, in which it dominates in a competitive market, makes a price range of $300 million to $400 million reasonable sounding,” he said.
He said the paper would have sold for much more were it not for the recession in the oil business, which is crucial to the state’s economy, and for the fact that it has a tough competitor in the Houston Post, with 316,209 daily circulation and 365,303 on Sundays.
Other major newspaper deals within the last year include Times Mirror Co.'s purchase of the Baltimore Sun and other associated media holdings for $600 million, and Gannett Co.'s purchase of the Louisville Courier-Journal and Times for $300 million.
With the Hearst purchase of the Chronicle, Houston no longer has a locally owned newspaper. The rival Post, which was owned by the Hobby family, was sold to the Toronto Sun Publishing Co. in 1983 for $100 million.
The sale came one week after the Chronicle ended a round of layoffs and voluntary early retirements.