Tuesday was a sad day for McClatchy with shares closing at an unholy $16.73, reflecting a 69% drop from $53.24 per share since the company’s purchase of Knight-Ridder in 2006. McClatchy reported a $1.3 billion loss for the first nine months of 2007, a drop of nearly $16 per share.
Gary Pruitt, McClatchy’s chairman and chief executive officer, said “The challenging business environment, coupled with the drag on our stock price, has resulted in our taking an impairment charge to write down the value of goodwill, mastheads of certain newspapers, and other assets on the company’s balance sheet in the third quarter. However, these are non-cash accounting charges, and nothing about them changes our operations or our ability to reduce debt.
When McClatchy took on Knight-Ridder for a total of $6.4 billion, the company assumed an additional $2 billion in debt. Not only did McClatchy possibly over-pay for the acquisition, but the mortgage crisis has affected ad revenues, particularly in the states of California where some of their major holdings, like the Sacramento Bee, reside. In addition, McClatchy owns nearly 50% of the Seattle Times, which the company valued at about $102 million at the time of the Knight-Ridder purchase, however, on Monday a report listed the publication’s value at a mere $19 million, reflecting a drop of nearly 80%.
