McClatchy Chain a Family Affair for 130 Years
In the Sacramento Bee’s founding editorial in 1857, editor James McClatchy vowed in the florid prose of the period that his journal would rely “upon a just, honorable, fearless course of conduct” and “make those men enemies who are enemies of the country.”
Above all, he promised, “the object of this newspaper is not only independence but permanence.”
This week, McClatchy’s great-grandchildren announced that permanence may now require them to give up some independence. After 130 years of private ownership, the McClatchys--whose family company now owns eight dailies--said they are considering selling shares to the public, for fear of corporate raiders. Like many other private newspaper owners, the McClatchy family worries that its future is less secure as ownership passes to an ever-larger number of heirs.
The McClatchys are considering a corporate structure, the family told employees Wednesday, that would virtually preclude family members from selling their stock to outsiders, thus preserving family control.
But public ownership could also impose new pressures to earn high profits on a company that for four generations has operated in a manner that is decidedly old-fashioned.
In an era when the newspapers owned by the giant Gannett Co. regularly earn pretax operating profit margins of more than 35% of revenue--though they generally have not received high marks for superior journalism--McClatchy papers earn closer to 20%--but have a reputation for investigative reporting.
When the McClatchys bought the Anchorage, Alaska, Daily News in 1979, for instance, they vowed to compete with the more powerful Anchorage Times by guaranteeing that it would have just as much space for news as the competition, even though it lacked the advertising to support it financially. Today, McClatchy’s is the No. 1 newspaper in Anchorage in circulation, and the McClatchys still haven’t turned a profit there.
“The company has demonstrated,” former executive editor Frank McCulloch said, “a willingness to take on big, tough and potentially dangerous subjects” through investigative reporting “and to risk and fight through the litigation that this inevitably brings.”
At one time, McCulloch said, McClatchy Newspapers had seven libel suits pending against it in Fresno County alone. Six have been dropped, McCulloch said, and the seventh is unresolved.
The traditions are “little changed” from those laid down by patriarch James McClatchy in that founding editorial, McCulloch said.
McClatchy came to California in the rush of 1849 and worked for several newspapers, even writing dispatches about the Gold Rush era for Horace Greeley’s New York Tribune.
As editor of the Bee, James McClatchy waged a long battle against hydraulic mining in the state, charging that it ruined the environment, poured debris into the rivers and harmed the farmers.
When he died in 1883, he was succeeded by C. K. McClatchy, who made his name as a champion of the state’s progressive movement, an ally of Gov. Hiram Johnson and a foe of the Southern Pacific Railroad’s grip over state government.
When C. K. died in 1936, he was succeeded by Eleanor Grace McClatchy, his daughter, who returned from her studies at Columbia University to run the Bee papers, which then included the Fresno and Modesto Bees, for the next 42 years.
The McClatchy papers also became known for liberal editorial pages. In his office, soft-spoken President and Editor C. K. McClatchy, Eleanor’s nephew and C. K.’s grandson, has autographed pictures of John F. Kennedy, Adlai Stevenson (for whom he once worked), Theodore Roosevelt, Franklin D. Roosevelt and Earl Warren.
C. K. McClatchy today runs the company with his brother James, who is chairman.
In recent years, the McClatchy papers have also earned a reputation in some circles for poor labor relations.
At four of its eight daily papers, McClatchy is operating without labor contracts with the Newspaper Guild. At two of those, labor talks have broken off, and the company has imposed work rules.
“Relations are just horrible,” said Travis Brown, a Sacramento Bee reporter and chairman of the guild bargaining committee at the paper. “The company is trying to bust its unions, and what is ironic about that is the Bee papers have long had reputations for being among the most liberal papers in the country.”
McClatchy officials declined to be interviewed for this article, citing Securities and Exchange Commission regulations concerning publicity by companies considering public offerings.
With eight daily papers, two weeklies and two twice-weekly papers, McClatchy now ranks 22nd among the nation’s newspaper groups in combined daily circulation with 671,997.
According to Advertising Age, the company is the nation’s 46th largest newspaper company in terms of annual revenue, totaling $310 million in 1986.
Bruce Thorp, an analyst with the brokerage Lynch, Jones & Ryan, estimated that with newspapers generally selling for 2 1/2 to three times revenue, McClatchy might have an open market value of $780 million to $950 million, perhaps more depending on 1987 revenue.
If one went by circulation, with recent multiples of $1,000 to $1,300 per subscriber, Thorp said, McClatchy might be worth $670 million to $870 million.
No Decision Made
But the fact that two of its papers, Sacramento and Anchorage, are in two-newspaper cities, might tend to lower its value, Thorp said, even though Sacramento is seen as a booming market, and the Bee dominates the rival Sacramento Union in circulation by 245,377 (weekdays) at the Bee to 90,888 at the Union.
Furthermore, if McClatchy does pursue a two-tier stock structure to protect family control, such plans usually discount the sale price of a company’s stock by 30%. That would reduce the value of the company to closer, at the top, to $530 million, Thorp estimated, of which the family would likely sell a minority share.
McClatchy officials emphasize that no decision has been made whether to proceed with a public sale.
“Whatever the outcome,” the family wrote in a letter to employees this week, “we want to assure you . . . that our first priority will continue to be the newspapers’ independence and editorial excellence.” They are the same goals, in less dramatic words, their great-grandfather outlined 130 years before.
Circulation Daily papers Weekday Sunday Anchorage Daily News 54,712 67,971 Fresno Bee 139,888 166,899 Modesto Bee 75,675 81,592 Sacramento Bee 245,377 289,083 Tri-City Herald 33,211 36,183 (Pasco, Kennewick and Richland, Wash.) Tacoma (Wash.) News Tribune 110,184 122,948 Hollister (Calif.) Free Lance 5,276 --- Gilroy (Calif.) Dispatch 7,627 ---
Source: Audit Bureau of Circulations (as of March 31, 1987) and McClatchy OTHER McCLATCHY NEWSPAPERS Clovis (Calif.) Independent (weekly)
News Messenger (Lincoln, Calif.) (weekly)
Morgan Hill (Calif.) Times (semiweekly)
Pierce County Herald (Puyallup, Wash.) (semiweekly)