Avenue Capital, a New York hedge fund whose holdings include the parent company of the National Enquirer, is now the leading bidder for Variety.
A late entrant in the sales process being run by Variety corporate parent Reed Elsevier, Avenue had bid more than $40 million, according to a person close to the process who was not authorized to speak publicly.
Avenue invests primarily in "distressed and undervalued assets," according to its website, and has $12 billion worth of holdings.
If it succeeds in purchasing Variety, Avenue probably would merge the back-end operations of the financially troubled 107-year-old trade newspaper with American Media, according to the New York Post, which first reported the news.
Along with the Enquirer, American Media's publications include Men's Fitness, Shape, Radar Online, and Star.
American Media is co-owned by Avenue along with other former bondholders including Angelo Gordon & Co.
Billionaire supermarket magnate Ron Burkle had been considered the leading candidate to purchase Variety by insiders. However, he has recently fallen behind other interested parties, the knowledgeable person said.