The history of the newspaper business was on vivid display at a hearing on Tuesday, when a federal bankruptcy judge in New York confirmed the sale of the McClatchy Co., a newspaper chain run by the same family since 1857, to a New Jersey hedge fund in a deal valued at $312 million.
The sale of McClatchy, the owner of The Sacramento Bee, The Miami Herald and more than two dozen other news outlets in 14 states, to Chatham Asset Management was in the works since February, when McClatchy filed for Chapter 11 bankruptcy protection after more than a decade of losses and cutbacks.
The deal, which will move a prestigious news publisher from family control to an investment company, is in keeping with a broader trend that has alarmed many press advocates, who argue that finance firms are imperfect stewards of an industry built on the watchdog work of chronicling government and commerce.
At the hearing, Judge Michael Wiles approved the result of an auction held last month in which Chatham, a fund that controls more than $4 billion in assets, emerged as the winning bidder.
The hedge fund offered to convert the more than $262 million it owns in McClatchy debt into equity in a Chatham-owned version of the company. It also agreed to throw in roughly $49 million in cash and will pay additional costs, including employee payroll, that McClatchy incurred since filing for bankruptcy.
After the sale becomes official -- probably by September -- Chatham will become the owner, and the publicly traded McClatchy will go private. The company's chairman, Kevin McClatchy, the great-great-grandson of the founder, James McClatchy, and its chief executive, Craig Forman, said they planned to depart once the deal closes.
The company will not be split up after it emerges from bankruptcy, according to the terms of the agreement. In a July 24 news release, McClatchy said Chatham's bid would allow it to retain most of its employees and honor its collective bargaining agreements.
After the judge announced his decision Tuesday, Forman said in an interview that the sale would benefit the company he has led since 2017. "Now, with this successfully addressed, McClatchy is very well positioned to go forward and continue to drive what we've built in the last three years, a sustainable digital growth platform for local news," Forman said.
By taking over McClatchy, a consistent winner of prestigious journalism awards, Chatham will acquire 30 news outlets in the United States. In addition to the McClatchy flagship paper, The Bee -- which was founded in the wake of the California gold rush -- the chain includes The Charlotte Observer, The Kansas City Star and the news agency McClatchyDC.
The mayors of several cities with McClatchy dailies, including Sacramento and Lexington, Ky., filed letters with the bankruptcy court urging civic-minded local ownership. Sreenath Sreenivasan, a professor of digital innovation at Stony Brook University's School of Journalism, noted with dismay the absence of bidders who were not part of the finance world.