News Foes May End San Francisco Feud, Merging Two Papers

For generations, one of America's most internecine newspaper wars has been waged in the streets of San Francisco, fueled by a long-standing rivalry between two old newspaper families.

But both sides may finally be ready to deal, with the result that the afternoon Examiner - in its heyday a flagship of the Hearst dynasty - would close up shop. If so, San Francisco would join the ever-growing ranks of one-newspaper cities.

According to published but unconfirmed reports, both sides would jointly own the morning newspaper. Under terms of the reported agreement, the DeYoung family, owner of the morning Chronicle, would turn over control of the combined paper to the Hearst Corporation, owner of the Examiner. The DeYoungs, however, would retain a majority share of the paper.

The talks are yet another chapter in a saga of this city's often-nasty newspaper wars. In keeping with the tangled nature of this drama, the 20-odd descendants of the DeYoung family who hold shares in the Chronicle company are themselves deeply divided. According to industry sources, Nan McEvoy, the family's largest shareholder, called a newsroom meeting at the Chronicle on Tuesday to deny that there would be any impending deal that would turn over control to their longtime foes, the Hearsts.

Ms. McEvoy has long favored retaining family control over the paper and played a key role in improving the paper's tattered reputation as a lightweight broadsheet. But McEvoy was ousted from control of the family corporation last year by an opposing faction that favors selling off the family assets, which include newspapers, television stations, a book company, and a cable company sold only recently.

Officials of both papers have so far refused to publicly comment on the report of an imminent deal published last Saturday by the San Jose Mercury News. But according to an informed source, Chronicle chief executive John Sias is currently holding talks in New York with Hearst. Even if an agreement is reached, the Chronicle board, made up of family members, may reject it, the source suggests.

Prospects of a merger have prompted the unions representing more than 2,000 workers at the two papers to ask San Francisco Mayor Willie Brown to convene a meeting to discuss the papers' fate. The union has also asked the US Justice Department to investigate whether a deal violates the Newspaper Preservation Act, which modifies antimonopoly laws and allows newspapers to form joint operating agreements (JOAs).

The unions fear that hundreds of jobs could be lost in a merger. "It's got people nervous," says Larry Hatfield, president of Local 52 of the Northern California Newspaper Guild. "It's safe to say they're not having these talks with the aim of increasing employment."

Such downsizing has become a growing trend in the newspaper business as large corporate chains increasingly opt for the bottom line. At the same time, family-owned dailies are being sold to corporations, points out James Risser, veteran newspaperman and director of the Knight Fellowship at Stanford University. "Third- and fourth-generation heirs decided they wanted to make more money with their money," he says.

FEW family papers can match the history of San Francisco's rival dailies. The Examiner was the flagship of a publishing empire built by William Randolph Hearst III, the flamboyant godfather of yellow journalism who was immortalized by a thinly fictionalized portrait in the Hollywood classic "Citizen Kane." The Chronicle has its beginnings in 1865 as a free, theater program sheet handed out in the lively Gold Rush era by the DeYoung brothers.

By the 1960s the two papers were slugging it out in a circulation war that threatened to drive them both under. In 1965, they reached their JOA, similar to ones formed by papers in other cities, under which they compete for news but share business and printing operations, splitting the profits equally. Under the agreement, which runs until 2005, each paper has the right of first refusal in the case of a proposed sale.

The JOA made the Examiner into an afternoon paper, where its circulation dropped to its current level of 115,000. The Chronicle, whose circulation fell from a 1990 high of 575,000 to about 494,000, is reportedly barely profitable.

Closing one of the papers will yield a $40 million to $50 million savings, an industry source says. Until recently, neither owner has been willing to step aside. Now the desire of many DeYoung family shareholders to cash in may overcome the enmity.