McClatchy announces planned merger with magazine giant behind Us Weekly, Woman’s World
McClatchy, one of the oldest and largest local media companies in the United States, plans to merge with accelerate360, a major magazine publisher and distribution business, the two companies announced Friday.
Both McClatchy and accelerate360 are owned by Chatham Asset Management, a New Jersey-based hedge fund with other assets in journalism and communications.
The boards of both companies voted to approve the intent to merge this week. Tony Hunter, McClatchy’s chairman and CEO, would take the helm as chairman and CEO once the new entity is formed.
The merger would fuse a local newspaper company that has won more than 50 Pulitzer Prizes with a line of glossy lifestyle and celebrity magazines – an unconventional marriage in the media industry that comes with cultural and ethical challenges.
But McClatchy executives said that accelerate360’s tabloid publications, including the National Enquirer, Star, National Examiner and Globe, would be excluded from the merger, and that its most famous consultant – David Pecker – would not be associated with the new organization.
Accelerate360’s content arm, a360media, produces 10 magazines, including Us Weekly, In Touch Weekly, Woman’s World and Life & Style.
McClatchy operates 30 newsrooms nationwide, including the Miami Herald, the Kansas City Star, the Sacramento Bee, the Charlotte Observer, the (Raleigh) News & Observer, the Fort Worth Star-Telegram and the Idaho Statesman.
The merged company would reach roughly 100 million unique readers a year – an entirely new audience level for advertisers, Hunter said in an interview. The merger would also provide readers with additional original content, he said.
“At the highest level, this creates value that, separately, both of us cannot do. If we don’t come together, the value of the individual companies is limited in the near-term,” Hunter said.
While both companies are profitable on their own, Hunter said that combining the two could triple both profits and revenues. “The sectors we’re in are secular-declining industries,” he added, “so the biggest value, at the highest level, is that.”
It is not immediately clear how or to what extent content from a360media – formerly known as American Media, Inc. – will be integrated into McClatchy’s platforms. Some a360media content has been available on McClatchy websites since the two companies reached a syndication agreement in 2022.
But Hunter said the new company would distinguish between McClatchy’s news products and the lifestyle and entertainment content of its new titles.
The new company would likely have three divisions, Hunter said, delineating McClatchy’s local news content, a360media’s lifestyle and celebrity titles, and accelerate360’s distribution arm.
Combining the two organizations would free up cash for what Hunter said would be an “active” and “aggressive” phase of mergers and acquisitions for the new company, which could get a new name as the agreement is finalized over the next few months.
In June, McClatchy acquired Trend Hunter, a company that uses artificial intelligence to glean insights into consumer trends.
“McClatchy and a360media are leaders in the delivery of essential local journalism and engaging lifestyle- and entertainment-focused content, respectively,” Chatham, which initiated talks over a merger, said in a statement. “The merger of these complementary companies creates a strong financial foundation that will foster further growth.”
Hunter said cost savings from the merger would likely come from process automation, back-office efficiencies and the elimination of redundancies. He acknowledged that would likely mean some job losses, although he said he would reserve judgment on the scope until he understood in greater detail how the two companies would be combined.
The newsrooms, he said, are “a different question.”
“I’m not anticipating any job cuts in content producers. That’s the top of my list of differentiators. Without that, we don’t have a business model,” he said.
“I’m very proud of that. Through the pandemic, all of that, we’ve stood strong on local content,” he said. On the a360 side, he added, “independent, original reporting is a differentiator for them, too.”
Hunter would keep his McClatchy leadership team, adding to its ranks David Parry, the current CEO of accelerate360, who has been leading the transformation of its distribution arm.
In a statement, Parry said the merger “brings together two industry-leading companies with an incredible digital audience, an extensive distribution and logistics network, and a portfolio of strong media assets.”
ETHICAL QUESTIONS
A360media was formed in 2020 under Chatham’s direction as a rebranding of American Media, Inc., or AMI, a company that was plagued with scandal at the time over its propensity to purchase the rights to stories and then bury them from public view, a practice that came to be known as “catch and kill.”
In 2016, AMI bought the rights to a story that could have proven politically harmful to Pecker’s old friend and ally, Donald Trump – then in his first presidential campaign – over an alleged affair with Karen McDougal. They also engaged in talks to buy an account of a porn star, Stormy Daniels, detailing a sexual encounter she had with Trump shortly after his wife had given birth to his youngest son, but ultimately declined.
Trump was convicted in May of 34 felony criminal counts over the matter, found by a New York jury to have falsified business records in order to conceal the story weeks before the 2016 election. AMI ultimately paid $187,500 to the Federal Elections Commission to settle the agency’s claims that it had violated campaign finance law in paying for the story.
Testifying in Trump’s trial in April, Pecker told the jury that, “on the celebrity side of the magazine industry, at least on the tabloid side, we used checkbook journalism and we pay for stories.”
Pecker did not specify which of AMI’s celebrity titles paid for stories, although he implied most of that activity occurred on the tabloid side of the business. As of today, one of the magazine titles that is set to merge with McClatchy – In Touch – states at the top of its website that “we pay for scoops.”
McClatchy’s newsroom ethical guidelines prohibit offers of “money, favors or anything of value” for interviews or information.
Pecker was removed from a360media’s leadership in 2020, but told the New York court that he still works as an a360media consultant.
Hunter said Pecker would not have any role in the new company once it is formed.
“No,” Hunter said. “He won’t be involved.”
Hunter said it was too early to tell how he would address differences in editorial standards at the two companies, noting they had only agreed this week on an intent to merge. But he was emphatic that McClatchy’s standards would be preserved.
“I will reserve my judgment until I do the work,” Hunter said, “but what I can tell you is, nothing’s going to be changed in the McClatchy standards. That is what I can assure you of.”
“We stand for journalistic excellence. We have high standards. We built trust over 160 years that can be lost immediately,” he added. “I’d never put that at risk.”
It is unclear what will become of the National Enquirer – perhaps the country’s most storied tabloid – or of the Globe, Star and Examiner. Repeated efforts by AMI and its successor to sell them in recent years, to Hudson Media, Icon Publishing and others, have fallen through.
But merging McClatchy with the rest of accelerate360 continues the consolidation of Chatham’s assets. In 2020, the hedge fund merged accelerate360, then primarily a wholesale distribution company, with AMI.
During the same period as AMI was facing intense public scrutiny, McClatchy struggled through a financial crisis caused by the continued transformation of the newspaper industry as well as the fallout from its last major merger, with Knight Ridder, a decade earlier, that had saddled the company with crippling pension debt.
McClatchy’s structured bankruptcy, declared in 2020, allowed the company to offload nearly 60 percent of its debt owed to lenders and emerge free of its legacy pension obligations. But it also forced the company’s sale. McClatchy faced a panic when Alden Global Capital, a vulture hedge fund notorious for gutting local newspapers, attempted to take over the chain in a hostile bid during the bankruptcy proceedings.
The McClatchy family, which had owned its namesake for 163 years, was ultimately able to sell the company to Chatham for $312 million that summer – a development that came as a relief to its newsrooms after Chatham announced plans to keep their staffs intact.
Hunter could not say what if any debt accelerate360 would carry over into the new company.
This story was originally published August 2, 2024 at 2:36 PM with the headline "McClatchy announces planned merger with magazine giant behind Us Weekly, Woman’s World."
