The McClatchy Company, burdened by debt and a steep slide in newspaper advertising, wants to sell one of its most prized properties, The Miami Herald, according to people briefed on the company’s plans.The problem for McClatchy is this: smart investors won't buy the Miami Herald now, because the value is dropping like a rock and they can get it alot cheaper later on.
McClatchy, the nation’s third-largest newspaper chain, has approached potential buyers for The Herald, said these people, who asked for anonymity because they were not authorized to discuss the issue. But they said they knew of no serious offers for the paper, reflecting the evaporation of major investors’ interest in buying newspapers.
The company refused to discuss the matter. Elaine Lintecum, the treasurer, said, “We do not comment on market rumors.”
The Herald is one of the largest of McClatchy’s 30 daily papers, with daily circulation of 210,000, and arguably the most prestigious, having won 19 Pulitzer Prizes. But it is not clear what kind of bids it might fetch, if any; with newspaper profits shrinking fast, the economy contracting and credit tight, many newspapers have been on the block for months without selling.
The people briefed on the company’s plans say The Herald generates a very slim operating margin and that the most attractive part of any deal could be its prime waterfront real estate. But the Florida real estate market is in deep recession — one of the reasons for the struggles of the paper, which used to benefit from heavy real estate advertising.
The bid to sell The Herald continues the fallout from McClatchy’s $4.5 billion purchase in 2006 of Knight Ridder, the newspaper chain that had owned the Miami paper. Largely as a result of that deal, one of the biggest in the industry’s history, the company has about $2 billion in debt, payments on which eat up much of its cash flow.
Some Wall Street analysts warned at the time that McClatchy, based in Sacramento, had overpaid, but even they did not expect the steep decline in newspaper advertising that began months later and has accelerated this year.
The drop has been most pronounced in Florida and California, states where McClatchy has a major presence. Through the first 10 months of this year, the company’s ad revenue fell 14.7 percent in other parts of the country, and 22.5 percent in California and Florida.
McClatchy reported third-quarter income of $4.2 million on $451.6 million in revenue. The company’s stock price, which topped $75 a share in 2005, closed on Friday at $2.20.
UPDATED: Mark Potts has a run-down of other newspapers for sale.