Chatham emerges with top bid in push to buy McClatchy
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 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 countries. 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.
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 adrevenue declines and prompted furloughs, pay cuts, layoffs and more newspaper closings.
In recent months Chatham put together the bid that has been declared the winner in a U.S. Bankruptcy Court auction supervised by Judge Michael Wiles, a McClatchy spokeswoman said Sunday.
Under the terms of the bid, Chatham is expected to become the majority owner in the third quarter of the year, and the publicly traded McClatchy will become a private company. It will also not be split up, the company said.
New York hedge fund Brigade Capital Management, also a McClatchy creditor, was expected to be part of Chatham’s bid.
In April, McClatchy said it had received a Chathamled bid worth more than $300 million. That offer included the debt the hedge fund and its partners had assumed in McClatchy.
In a statement, Craig Forman, the McClatchy chief executive, said the deal would allow the company to continue as a provider of strong news coverage across the country.
“We’re pleased that Chatham and the supportive secured first-lien creditors believe in our business and our mission and are helping to achieve these goals,” Forman said. “Local journalism has never been more vital, and we remain steadfast in our commitment to delivering on our mission and continuing to serve our communities.”
A Chatham spokesman did not immediately reply to a request for comment Sunday.
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.
In the fall, Alden took a 32% stake in Tribune Publishing, the owner of the Chicago Tribune, The Baltimore Sun and papers in nine other major metropolitan areas. Earlier this month, Alden secured a third seat out of seven on the Tribune Publishing board as it seemed to inch closer to taking control of that company. It also has a 7% stake in another chain, Lee Enterprises, the publisher of The Buffalo News and dozens of other papers.
Chatham’s other media holdings include the Canadian newspaper chain Postmedia and National Enquirer publisher American Media Inc.
Chatham is led by Anthony Melchiorre, a Chicago-area native who worked on Wall Street at Goldman Sachs and Morgan Stanley, where he led its junk bond division. He set up his hedge fund in Chatham, New Jersey, in 2002. The firm often takes on the debts of struggling businesses that still have good cash flow. American Media and McClatchy fit that profile.
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.
The New York Times contributed.