Times Mirror Buys Small Stake in McClatchy Papers

Times Mirror Co. announced Friday that it had acquired a small interest in McClatchy Newspapers, the closely held Sacramento company best known for its ownership of the Bee newspapers of California.

Because of a stock arrangement that virtually assures family control of McClatchy, analysts saw the acquisition by Times Mirror, which publishes the Los Angeles Times, as simply a long-term investment without any intention toward a merger or takeover.

“Psychologically, it does tend to link the two companies, but whether that really means anything is open to question,” said Bruce Thorp, who analyzes newspaper stocks for Provident National Bank in Philadelphia. “Without cooperation of all the McClatchy insiders, Times Mirror couldn’t really be up to much of anything,” Thorp said.

Times Mirror’s acquisition amounts to 7% of McClatchy’s Class A common stock, or 293,900 shares, and cost the company about $6 million on the open market.

But because only 14% of McClatchy shares are publicly traded, Times Mirror’s stake really amounts to less than 1% of McClatchy overall.

Typical in Industry

The rest of McClatchy shares are family-controlled Class B stock, which has 10 times the voting power per share of the publicly traded Class A stock. To further maintain family control, any Class B shares sold to outsiders immediately converts to Class A status. Hence, any sale of family shares actually increases family control.

Such multi-tier stock structures are designed to protect against takeovers and are typical of newspaper companies. Times Mirror itself has a multi-tier stock structure.

According to sources close to McClatchy, Times Mirror Chairman Robert F. Erburu even called officials at McClatchy before the shares were purchased to privately assure them that the company was buying the stock only as an investment.

McClatchy first sold shares to the public in February, 1988. Earlier this year, McClatchy Chairman C. K. McClatchy died, and on June 27 his estate sold 1 million shares of his stock to help pay estate taxes. It was not clear whether the roughly 300,000 shares that Times Mirror purchased involved any of those shares.

Owns 12 Daily Papers

McClatchy owns the Sacramento Bee and 11 other daily papers, including the Fresno and Modesto Bees, the Tacoma News Tribune in Washington state and the Anchorage Daily News in Alaska.

In addition to The Times, Times Mirror publishes Newsday in Long Island and New York, the Baltimore Sun and Evening Sun, and four other newspapers. The Los Angeles-based company’s interests also include broadcast and cable television and book, magazine and other publishing.

In composite trading Friday on the New York Stock Exchange, McClatchy Class A stock gained 62.5 cents a share to close at $22.25. Times Mirror shares closed at $41.50, off 25 cents.