McClatchy stock sank to a new 52-week low on Thursday after the company that was feverishly trying to do a deal with the larger Tribune Publishing earlier this year, reported a net loss of $42 million in the first quarter as revenue tumbled 9.3 percent to $180.3 million.
McClatchy, owner of the Miami Herald, Kansas City Star and other papers still had close to $745.1 million in debt on its books at the end of the quarter thanks in large part to its acquisition of Knight Ridder a dozen years ago.
Tribune, owner of the Chicago Tribune, the Baltimore Sun and the troubled New York Daily News was an attractive target because it is debt-free thanks to its $500 million sale of the LA Times and San Diego Union-Tribune in mid-2018.
But the problem with an $18-a-share McClatchy offer was that it was a cash and stock offer.
Tribune investors who wanted out — such as former chairman Michael Ferro and LA Times owner Patrick Soon-Shiong — had no interest in sticking around in a new deal if it contained stock in the merged company, sources said.
“I think the chances of a deal are moving toward zero,” said one Wall Street source. “Tribune doesn’t have enough cash to offset McClatchy’s debt load. There is some overlap in markets but not enough to make the huge dent they’d need in expenses.”
Chatham Asset Management is the single largest shareholder in McClatchy with about a 23 percent share stake.
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