Digital First Media is poised to become the new owner of the Boston Herald after besting competitors with multiple higher bids during a bankruptcy auction Tuesday that netted nearly $12 million, according to newly filed court documents.
A transcript of the auction held in the office of Herald law firm Brown Rudnick revealed that Digital First opened with a bid valued at around $7.6 million — higher than the offers already in place from two other competitors, GateHouse Media and Revolution Capital Group.
After GateHouse countered Digital First with a slightly higher offer, Revolution Capital dropped out, leaving the two competitors to trade bids several times until Digital First’s final offer proved too rich for GateHouse, according to a transcript of the auction filed with bankruptcy court in Delaware.
The Denver-based company, which owns daily and weekly newspapers in Colorado, California, Massachusetts, and several other states, prevailed with a final offer of $9.6 million in cash, $1 million in accrued paid time off to employees, and another $1.4 million in assumed liabilities.
When the Herald initially filed for bankruptcy in December, it had struck a deal to sell to GateHouse for $4.5 million in cash and up to $500,000 in paid time off. Digital First and Revolution emerged as bidders until later in the bankruptcy process.
Digital First is not shouldering any of the pension liabilities for Herald employees. When it first filed for bankruptcy, the Herald listed $31 million in liabilities, much of which is the shortfall in employee pension and other retirement accounts. During an appearance on the Boston Herald’s radio station Wednesday, Mayor Martin Walsh called on Digital First to “take responsibility” for the retirement accounts.
Other creditors include The Boston Globe, which prints the Herald. The proceeds from Digital First will be divided among creditors through the bankruptcy process.
The bankruptcy judge has scheduled a hearing Friday to review the sale terms. The deal is expected to close in late March.
The Herald and some of its employee unions had previously agreed to vacate their labor contracts, with the stipulation the winning bidder would recognize employees’ accrued paid time off and seniority status, and promise to make job offers to at least 175 of the Herald’s 240 employees.
Digital First, also known as MediaNews Group, is controlled by Alden Global Capital, a New York hedge fund. It is known as a relentless cost cutter, and recently started layoffs at one of its bigger papers, the Orange County Register in Southern California. In Massachusetts, it owns the Lowell Sun and the Sentinel & Enterprise in Fitchburg.
With his soon-to-be former employees facing an uncertain future, Herald publisher and longtime co-owner Pat Purcell told the Digital First team at the auction that “you got a great newspaper and you have got a great city and you can make this thing really, really be important, and more important, hopefully, as time goes by.”
On Wednesday, Purcell and Herald attorney Bill Baldiga met with Herald staff to discuss the sale. Reporter Bob McGovern asked Purcell if large metro papers could survive under a single owner during this difficult environment for newspapers.
McGovern posted Purcell’s response on Twitter: “It was really hard for me. It’s probably not so hard for Jeff Bezos or Rupert Murdoch. But we’re in a tough business, and we did a great job.”