Shares of McClatchy Co. (NYSEAMERICAN: MNI), one of the largest newspaper chains, trade as if the company will declare Chapter 11. At $0.69 per share, it is far below its 52-week high of $6.23. The company’s market value is $5.6 million, against revenue close to $700 million a year. At some point, if it has not already happened, McClatchy and its debt holders must have a plan to sell its largest papers.
One issue for buyers is whether the government will allow two large papers in adjacent markets to be held by a common owner. As the newspaper industry implodes, that is certainly a possibility. If so, McClatchy would have ready buyers for its California newspaper group, the Fort Worth Star-Telegram, the Miami Herald and its papers in North Carolina.
The Fort Worth paper is just miles from the Dallas Morning News headquarters. The Dallas paper is the sole daily property of small publicly traded company A.H. Belo Corp. (NYSE: AHC). Belo is considered fairly successful. It has a market cap of $62 million. That is impressive for its revenue, which was probably $200 million last year. The two papers would have the chance for significant consolidation of expenses.
The Miami Herald would be attractive to two companies. Tribune Publishing Co. (NASDAQ: TPCO) owns the Orlando Sentinel and Sun-Sentinel in Fort Lauderdale. Gannett Co. Inc. (NYSE: GCI) owns papers on the east coast of Florida, particularly the Palm Beach Post, St. Lucie News-Tribune in Fort Pierce and papers further north in St. Augustine and Jacksonville.
The Kansas City Star is close to Topeka, where Gannett owns the Topeka Capital-Journal.
The Sacramento Bee, Modesto Bee, Merced Sun-Star and Fresno Bee are all close to the several papers owned by privately held MediaNews Group, particularly its properties clustered around San Francisco, which include the Bay Area News and the Mercury News in San Jose.
McClatchy’s New & Observer in Raleigh and the Charlotte Observer are relatively close to the Winston-Salem Journal, which was just bought by Lee Enterprises Inc. (NYSE: LEE). The Fayetteville Observer, owned by Gannett, is also nearby.
In the third quarter of last year, McClatchy posted revenue of $167 million, down from $191 million in the same period the year before. It lost $304 million, $295 million of which was write-offs. In the third quarter of 2018, it made $7 million. Its interest expense runs about $20 million a quarter. Long-term debt at the end of the period was $608 million. Deferred pensions were $528 million.
The odds that McClatchy’s papers will be sold is high, and there is already a list of buyers.