The New York Post reports that there may be a marriage of two of America’s largest newspapers chains. McClatchy Co. (NYSE: MNI) has retained a banker, the report says, in an attempt to buy Tribune Publishing Co. (NASDAQ: TPCO). A consolidation almost certainly would kill dozens of jobs at the corporate level and others in geographic areas where the two companies have properties that overlap.

The buyout would be based on an all-cash offer from McClatchy. The company may have trouble if it needs to raise the $500 million it would take to close a deal. Tribune does have nearly $100 million of cash on its balance sheet, which would effectively lower the price. McClatchy’s balance sheet is more complex and makes a deal difficult financially. Its market capitalization is less than $50 million. McClatchy’s long-term debt is nearly $675 million. Its pension and post-retirement obligations are over $584 million. Another hurdle is that each company has tiny net income margins. And revenue at each company is falling. Across the industry revenue at large and midsized daily newspapers is expected to drop over 5% this year on top of a similar drop in 2018.

Each of the companies spends millions of dollars to be public. This includes costs of SEC filings, audits and most senior corporate officers. One set of these expenses would be nearly eliminated in a merger.

The companies have papers that are geographically close to one another. Newspaper companies have used this factor to eliminate duplicate jobs in the past. The most obvious between McClatchy and Tribune is in Florida. Tribune owns the Sun-Sentinel in Fort Lauderdale and the Orlando Sentinel. McClatchy owns the Miami Herald.

Another reason for job cuts if the companies are combined is the huge amount of debt that will have to be taken on to close a deal. Debt service per year could be in the tens of millions of dollars. If revenue at the combined company continues to drop, which should be the expectation based on industry trends, the current cost base would be impossible to maintain. McClatchy already has shown that it needs to shed jobs. It offered a buyout to 450 people, about 13% of its total staff.

The consolidation of the newspaper industry will continue as a means to cut costs at chains. A buyout of Tribune by McClatchy has to be based on management’s belief that it can substantially cut costs in a marriage, and that means jobs.

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