The agreement, still subject to final court approval, will elevate Chatham and its chief executive, Anthony Melchiorre, to major-player status in an industry that faced existential challenges even before the coronavirus pandemic pulverized many news organizations. Like its peers, McClatchy has been desiccated after years of deserting advertisers, disappearing readers and evaporating profit.
Chatham has announced few specific plans for McClatchy, to which it has loaned money for more than a decade. But its emergence as the company’s controlling shareholder has sparked a new round of hope and anxiety in McClatchy’s weary newsrooms.
“We don’t know what they’re up to, and that’s an ominous feeling,” said Mary Ellen Klas, the Miami Herald’s Tallahassee bureau chief, on Monday, a day after the sale. “We fear that they’re efficiency experts, not journalists, and that’s a daunting prospect if you care about reporting the news. There’s a lot of uncertainty.”
By Klas’s count, the Herald now has about 130 journalists left, down from about 400 when McClatchy acquired the newspaper in 2006 in its ill-starred takeover of the Knight Ridder chain for $4.5 billion.
“We’ve been cut to the bone,” said Klas’s colleague, investigative reporter Julie K. Brown. “I am hopeful that they understand that to be profitable, you need good journalism. That means you need people. Investigative reporting is grueling and expensive. You have to invest in it.” Brown’s articles on the victims of convicted sex trafficker Jeffrey Epstein in late 2018 helped revive interest in the case and led to his arrest.
McClatchy, hobbled by debt and pension obligations, filed for Chapter 11 protection in February. Under a restructuring plan submitted to a bankruptcy court in New York, Chatham — its largest investor outside of the McClatchy family and biggest debt-holder — will emerge as the sole owner and take the company private. The companies did not put a price on the deal announced Sunday, but in an earlier filing, Chatham offered roughly $300 million in a combination of restructured debt and at least $30 million in cash.
The shedding of much of McClatchy’s debt through bankruptcy court gives Chatham some financial breathing room, said Rick Edmonds, a media-business analyst at the Poynter Institute. It’s possible, he said, that Melchiorre could sell some McClatchy titles to raise money or that he would consider merging the company with another chain owner to cut costs further.
Chatham — named by Melchiorre after the suburban New Jersey township where the firm is based — is among a group of private-equity firms that have emerged in the past decade as the newly dominant players in the newspaper business. Its peers include Alden Global Capital, Fortress Investment Group and Apollo Global Management. Fortress and Apollo control the largest publisher, Gannett Co., which owns USA Today and 250 other dailies; Alden owns Digital First Media, which publishes some 50 papers, including the Denver Post and the San Jose Mercury News.
Though newspapers have been declining for years, these investors have wrung profits from them through severe cost-cutting measures, including layoffs and the sale of assets such as the papers’ headquarters buildings. The strategy, sometimes derided as “vulture capitalism,” has gradually weakened newspapers but has been financially lucrative.
Melchiorre, 52, is a former Wall Street junk-bond trader who co-founded Chatham in 2003. Chatham became involved in publishing through its 2014 acquisition of American Media Inc., the publisher of the National Enquirer. It later acquired a Canadian company, Postmedia, which owns the National Post, the Ottawa Citizen and the Montreal Gazette.
Enquirer publisher David Pecker and AMI admitted in 2018 that they had funneled $150,000 to former Playboy model Karen McDougal in 2016 to suppress her story of a 10-month affair with Trump, starting in 2006, to help his presidential election prospects. The admission about the tactic — known as “catch and kill” — came as part of a non-prosecution agreement with the Justice Department; in exchange, Pecker and AMI agreed to cooperate with an investigation.
Melchiorre and his wife were guests at the White House in July 2017 for a dinner with Trump that was arranged by Pecker, according to “The Fixers,” a book by Wall Street Journal reporters Joe Palazzolo and Michael Rothfeld that detailed AMI’s catch-and-kill methods. The dinner included Kacy Grine, a French businessman and adviser to Saudi Prince Alwaleed bin Talal, and Dylan Howard, then the editorial director of AMI.
AMI went on to produce a glossy magazine that praised Saudi prince Mohammed bin Salman, an unusual subject choice for a company known for its supermarket tabloids. The CIA later concluded that Salman approved the killing and dismemberment of Jamal Khashoggi, a dissident Saudi journalist who wrote for The Washington Post.
Amazon founder and chief executive Jeff Bezos, who owns The Post, has also suggested that Salman’s intelligence services were behind the hacking of his cellphone around the time the Enquirer published a story exposing his extramarital affair last year. Bezos said Howard used the intimate photos to try to blackmail him into making statements supportive of AMI; instead, Bezos made the allegations public.
Chatham in a statement said that it was “pleased with the outcome of the auction” for McClatchy and that it was “committed to preserving newsroom jobs and independent journalism that serve and inform local communities during this important time.”
The mayors of Miami-Dade County, Fla., Kansas City, Mo., Raleigh, N.C., and Lexington, Ky., all wrote to the bankruptcy court judge asking that he approve a sale to a responsible steward of journalism.
“Our community needs a strong daily paper that is locally rooted and locally invested in our community, motivated by the desire to serve the broader public interest and not the narrow bottom line,” Raleigh Mayor Mary-Ann Baldwin wrote. “Please consider paths for each of the local McClatchy papers that will help sustain and support strong, independent journalism.”
Jacob Bogage and Sarah Ellison contributed to this report