McClatchy Co., the owner of the Miami Herald, Kansas City Star and other newspapers, has become the latest casualty of the collapsing industry to fall into hands of an investment firm.
Only a day after Warren Buffett’s long-time business partner predicted the death of newspapers, the struggling McClatchy filed for bankruptcy in New York with plans to hand majority ownership of one of the industry’s largest newspaper publishers to hedge fund Chatham Asset Management, owner of the scandal-plagued tabloid National Enquirer.
The plan further tightens the grip of financial firms on the newspaper industry, renewing concerns over the cost-cutting and loss of local coverage that often follows ownership by financial firms. Funds from Chatham to Alden Global Capital LLC and Fortress Investment Group LLC have swooped in to take stakes in hundreds of papers, including once-mighty names as the Chicago Tribune and the New York Daily News.
The nation’s largest newspaper chain is owned by New Media Investment Group Inc., which is managed by Fortress.
If McClatchy’s bankruptcy plan succeeds, more than one-third of the total circulation of U.S. newspapers will be controlled by private equity firms or hedge funds, according to analyst Ken Doctor.
“These are companies in a distressed industry,” he said. “It takes financial players to come in and operate them and they’re cutting and cutting.”
McClatchy’s bankruptcy marks a grim milestone for a newspaper chain that was founded in 1857 with the Sacramento Bee. Chatham Asset Management, which would be its new owner, holds an 80% stake in American Media, owner of the Enquirer and run by David Pecker.
In 2018, American Media entered into a non-prosecution agreement over claims that Enquirer editors had sought to assist Donald Trump during the 2016 election by suppressing potentially harmful stories about the candidate’s earlier affairs.
Chatham’s founder, Anthony Melchiorre, had dinner at the White House with President Donald Trump and his long-time friend Pecker in July 2017. American Media announced the sale of the tabloid last year, but the deal has yet to close.
“As a supportive investor in McClatchy since 2009, Chatham is committed to preserving independent journalism and newsroom jobs,” the firm said in a statement.
Local Coverage
Hedge fund ownership of newspapers has stirred a debate over whether their cost-cutting know-how will help restore profits or lead to an exodus of talent and diminution of local coverage. Alden Global, which controls about 50 daily newspapers, has gained a reputation for making deep cuts to newsrooms. Legacy owners point to the enormous financial obstacles they are facing.
“The media industry has been under tremendous pressure for years,” McClatchy Chief Executive Officer Craig Forman said in a statement, adding that “technological advances, consumer-behavior shifts, and business-model challenges are among the many disruptive forces.”