June 22, 2024

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Sacramento Mayor Steinberg recruiting ownership group in effort to buy Sacramento Bee

Sacramento Mayor Darrell Steinberg is working to form a local ownership group that could purchase The Sacramento Bee, separating the 163-year-old publication from its parent company and more than two-dozen sister newspapers across the U.S.

The Bee’s current owner, McClatchy Co., is moving through Chapter 11 bankruptcy in an effort to restructure its debt and shed pension obligations. If the restructuring plan proposed by McClatchy is approved by a judge, the likely owner of The Bee and 29 other publications would be Chatham Asset Management LLC, a New Jersey-based hedge fund.

Steinberg said it is his “responsibility as mayor to continue to fight for any community asset that is vital to the future of Sacramento.”

Steinberg compared the effort to the city’s successful years-long campaign to keep the Sacramento Kings and build an arena downtown. He indicated he is working with private investors just as he did to win an expansion MLS team for Sacramento. The mayor declined to identify who he has spoken with about a possible Bee purchase, but his office said the group includes multiple deep-pocketed investors and one California billionaire who has demonstrated an interest in ownership.

“We’re not going down without a fight on behalf of the community, just like we didn’t go down when it came to the Kings, when it came to Major League Soccer, when it came to everything else we are achieving in this city and in this region,” Steinberg said.

Purchasing The Bee during those proceedings would be a complicated but not unprecedented maneuver. Los Angeles and Santa Rosa newspapers have transitioned to local ownership in recent years. It would involve gathering a team of well-heeled investors willing to share ownership of a local publication in an industry in steep decline. That investment team would have to convince the bankruptcy judge and the company’s creditors, which includes Chatham, to sell the property.

The Sacramento Bee, founded during the Gold Rush, was the first newspaper owned by the McClatchy family. The news empire, which is currently based in Sacramento, grew to include papers throughout California’s Central Valley, and now counts the Miami Herald, Charlotte Observer and Kansas City Star among its properties.

Steinberg said The Bee needs to remain local and independent.

“Would we really be better off in this city if the Kings left town and we had a big hole in the ground and no prospect for downtown revitalization?” Steinberg said. “Are we better off in any way if we lose one of the most important voices for independent journalism? The answer is obviously no, and so it’s my job to rally and to organize and to help bring forward some real ideas that might, might, might save the day.”

A Chatham spokesman declined to comment on the mayor’s plan because the company does not yet own McClatchy’s assets, but said, “As a supportive investor in McClatchy since 2009, Chatham is committed to preserving independent journalism and newsroom jobs. We look forward to working with the company in the best interests of all stakeholders.”

Jeanne Segal, a McClatchy spokeswoman, said the company had no comment.

The mayor said he would convene a forum on March 27 with potential investors, philanthropy and community leaders to discuss possible ownership structures and to raise at least $20 million for local journalism. The James B. McClatchy Foundation, a nonprofit that has no connection to the McClatchy family on the board and that focuses on education and First Amendment causes, will co-host the convening.

“We are going to bring together as many community leaders as we can and educate ourselves on as many models in the country as we can,” he said. Steinberg has long advocated for local journalism, writing in a series of tweets the day McClatchy filed for bankruptcy that “high caliber, independent journalism is essential for California’s capital city.”

The mayor said the city should not and will not be a fiscal sponsor of the news organization, which regularly holds public officials to account.

New Ventures Lab connection

Steinberg decided to go public with his plan following a decision made during bankruptcy proceedings.

On Feb. 26, McClatchy announced it would terminate its lease with the city for space at 401 I St., the current home to McClatchy’s New Ventures Lab. McClatchy holds public events and the company’s visual, design and multimedia staff work on projects at the office, located in the historic buildings next to the Amtrak station.

The decision to end the lease opened the door for the city to seek a spot on the unsecured creditor committee, which includes vendors, the Pension Benefit Guaranty Corporation, lenders and the NewsGuild. As the leaseholder for the New Ventures Lab, Steinberg and city officials dispatched the treasurer and an assistant city attorney to a hearing in New York to seek a seat on the 7-member committee.

Their request was denied, a decision Steinberg said was concerning.

“Unless we have a strong seat at the table and have some ability to influence the outcome (of the bankruptcy case) in a way that protects this community asset, the community is going to lose,” the mayor said.

Local ownership in California

There is some precedent for newspapers to return to local control. In 2012, a group of investors purchased The Press Democrat in Santa Rosa, the Petaluma Argus-Courier and the North Bay Business Journal from a Florida-based media company. Local developer and lobbyist Darius Anderson was the lead investor. Last year, his company, Sonoma Media Investments, announced it was debt-free.

Anderson told The Press Democrat last year that he was motivated to make the newspaper group successful out of a sense of community pride. The newsroom won a Pulitzer Prize for its coverage of the 2017 wildfires.

“Sometimes you do things for financial returns, sometimes for spiritual returns or for ideological returns,” he told the newspaper. “This fulfilled a number of those buckets.”

Prominent news industry analyst Ken Doctor, who has written about McClatchy’s future, said, “Historically, if you look at the last five to 10 years, it’s a narrow path (for an ownership group to purchase The Bee), but there is a possible path because there is a fair amount of chaos in the newspaper industry.”

While it’s unclear what Chatham plans to do with the 30 McClatchy properties, Doctor said it would be easier for the hedge fund to sell the entire company or merge with another media company rather than sell individual newspapers.

However, he said “if there’s enough money on the table, a financial owner can be swayed.”

Doctor cited the 2018 purchase of The Los Angeles Times by billionaire Dr. Patrick Soon-Shiong, who acknowledged he overpaid when he bought the Times for $500 million from Tribune. He said in October 2018: “It wasn’t the money. It wasn’t the business. It was, ‘Do we want this paper to exist or not?’”

The Bee’s value as an individual newspaper is not publicly available. If The Bee emerges from bankruptcy with a new owner, it would require a “complicated effort,” Doctor said.

Many of McClatchy’s business functions have been centralized, including circulation and digital infrastructure, which means “a new owner would have to rebuild pretty much from the ground up,” Doctor added.

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