NEW YORK—Hedge fund Chatham Asset Management plans to buy newspaper publisher McClatchy out of bankruptcy, ending 163 years of family control.
The companies did not put a price on the deal in an announcement Sunday. The agreement still needs the approval of a bankruptcy judge; a hearing is scheduled for July 24.
McClatchy is one of the largest newspaper companies in the United States. It owns 30 papers including the Miami Herald, the Charlotte Observer, and the Sacramento Bee. It filed for bankruptcy protection because of a heavy debt load stemming from its $4.5 billion purchase of the Knight-Ridder newspaper chain in 2006, just as the newspaper industry went into steep decline.
Chatham was McClatchy's largest shareholder and debt holder. It beat out a bid from Alden Global Capital, another hedge fund that has taken a leading role in the U.S. newspaper business.
Chatham's other media holdings include the Canadian newspaper chain Postmedia and National Enquirer publisher American Media Inc. But industry expert Ken Doctor has noted that it doesn’t make financial sense to combine those with McClatchy in order to cut costs, as newspaper dealmakers like to do. And the emergence of Alden Global Capital as a bidder has given rise to speculation that Chatham will try to combine McClatchy with Alden’s holdings or with another big newspaper company, like Gannett.
While national newspapers such as The Wall Street Journal and The New York Times are adding digital subscribers that help them navigate advertising declines, many local outlets have had a difficult time. That has contributed to a string of bankruptcies and consolidation, much of it involving investment firms, deepening concerns about declining quality as newsrooms shrink and papers close.
The coronavirus pandemic has exacerbated ad-revenue declines and prompted furloughs, pay cuts, layoffs, and more newspaper closings.
Several mayors of cities where McClatchy has a paper wrote to the bankruptcy court, asking the judge to consider the civic value of the paper.
“We want our newspaper to emerge from this bankruptcy with owners who are willing to invest in our community, and provide us with journalism at its best,” Lexington, Kentucky, mayor Linda Gorton said of the Lexington Herald-Leader.
McClatchy’s origins date to 1857, when it began publishing a four-page paper in Sacramento, California, following the California Gold Rush. The company remains headquartered in Sacramento.