How the Blethen family lost 49.5 percent of the Seattle Times

by Bill Richards, Crosscut

Last week, minority shareholder McClatchy, the Sacramento newspaper chain, said it was willing to sell its not-quite-half slice of the Seattle Times. So how did a locally controlled Northwest newspaper company wind up with a national partner to begin with? The story starts in the 1920s.

When Gary Pruitt, McClatchy Co.'s chief executive, told shareholders last week that his company was willing to sell a 49.5 percent minority stake in the Seattle Times Co., a McClatchy executive quickly declared Pruitt's announcement wasn't news. McClatchy has been "willing to sell ever since we acquired it," said Elaine Lintecum, McClatchy's treasurer.

That might be McClatchy's position these days. Publicly and privately, however, Lintecum and other McClatchy officials previously have said the Sacramento-based newspaper chain planned to hold on to the Times stake, which McClatchy picked up as part of a $4.5 billion purchase of Knight Ridder in 2006. "We plan to be a partner," Howard Weaver, McClatchy's vice president for news, told The Seattle Times at the time. "We plan to participate."

Times change, and since the Knight Ridder acquisition McClatchy has gone from the newspaper industry's power position to a precarious financial bind — its stock has fallen to less than a quarter of its value at the start of 2007. McClatchy's writedown of its Seattle Times Co. stake by 88 percent, from $102.2 million to $12.1 million in the last year, makes the Seattle company the biggest loser in a troubled newspaper portfolio.

So how did Knight Ridder become the Times Co. minority shareholder, anyway? The official corporate history is somewhat vague about details of the transaction. But two documents — a 2001 Harvard Business School case study on the Seattle Times Co. and the Seattle-area Blethen family, which owns the controlling interest in the company, and a 1946 Washington Supreme Court decision in a legal fight between the Ridder family and the Blethens — provide a detailed account...

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