Katz and Lenfest have been feuding for months with George Norcross III, one of six investors who paid $61.1 million for the media properties in March 2012.
Norcross, who in December bought the shares of one investor, Krishna Singh, was allied with the other two investors, Bill Hankowsky and Joe Buckelew. Together, they owned 57.45 percent of the company - with Norcross being the only owner who controlled more than 50 percent of the shares - while Katz and Lenfest owned 42.55 percent.
Yesterday's auction at the Cira Centre law office of Dechert LLP started with a minimum bid of $77 million, with each side having 10 minutes to increase the bid by $1 million. The auction was not open to the public or media. Katz and Lenfest later said an order from the Delaware Chancery Court judge, who set the rules of the auction, prohibited them from discussing how the bidding unfolded.
The $88 million sale price included $15.3 million in company debt, bringing the real sale price down to $72.7 million.
Norcross walks away from the auction with $38 million, while Buckelew collects $3 million and Hankowsky takes $726,405.
"My view is both parties won today," Katz said after the auction, calling Norcross' price "a wonderful return on his investment" while he and Lenfest get the "privilege" of running the company.
The losing bidders left the auction saying little beyond wishing Katz and Lenfest good luck.
"It is time to return the company's focus to journalism, and away from the conflict among its owners," they said in a statement.
Although Katz and Lenfest pledged to restore stability to the media properties, many unanswered questions remain.
They listed declining newspaper circulation and advertising revenue as the most pressing problems, but don't have an immediate plan to address them.
They also could not say whether the company would push on with Philly.com content being free while Daily News and Inquirer websites are behind online paywalls. And they could not say much about the future of the Daily News or whether the company's employees would face further layoffs or wage-concession requests.
Katz and Lenfest said those answers would come from the new publisher they are seeking to hire.
"I made my fortune, and I think Lew did also, by having people who were very good at doing what they were doing," said Lenfest, now serving as interim publisher. "I didn't micromanage."
Bill Ross, executive director of the Newspaper Guild, which represents employees in the newsrooms and advertising, circulation and finance departments, said he wanted to "make it very clear to the new owners that they better not come looking for concessions from our union."
The ownership structure of the company was unclear yesterday. Lenfest said he and Katz would have equal shares and be majority owners but may bring on other investors. The new publisher would report to a board of directors, some of whom may be appointed without investing money, Lenfest said.
Brian Tierney, who served as CEO of a previous company that owned the media properties, may do some consulting but won't have an active role, Lenfest said.
"We're hopeful that there will be a whole bunch of people in the community who get involved on a much smaller scale to bring in diverse views and some outside support," Katz said.
The ownership feud erupted publicly in October when then-publisher Robert J. Hall fired Inquirer editor Bill Marimow.
Katz, who served with Norcross as a two-man management committee, objected, saying they had to agree on major moves like firing an editor.
A Philadelphia judge eventually overturned Marimow's dismissal after Katz and Lenfest sued.
On Twitter: @ChrisBrennanDN