No need for a question mark in the title, Papyrus is definitely gone -- some of the Papy devs posted in the thread linked in the story. VUG only asked the moderators to not try to explain the closure until they released an "official" announcement on it but said it was okay to confirm it.
Impressions (the studio behind the Caesar games, among others) was also closed.
This just continues VUG's consolidation, basically folding up every shop that doesn't exist outside its Los Angeles offices. The difference between them doing this and, say, EA (closing Westwood) is that EA generates record revenue, VUG generates record losses.