McClatchy Co. flagship newspaper Star Tribune sold to private equity group for $530 million

Tuesday, December 26th 2006, 6:09 pm

By: News On 6

MINNEAPOLIS (AP) Newspaper publisher The McClatchy Co. said on Tuesday that it will sell its flagship newspaper Star Tribune to a private equity firm for $530 million, a sharp drop from the $1.2 billion it paid to acquire the newspaper just eight years ago.

McClatchy said it decided to sell the newspaper to Avista Capital Partners through a private bidding process ``after a strategic reevaluation of its portfolio of holdings'' following McClatchy's purchase of Knight Ridder for $4.5 billion earlier this year.

McClatchy faces a large tax bill from selling off 12 other newspapers earlier this year as part of its purchase of Knight Ridder. It said the tax benefit of selling the Star Tribune at a loss is worth $160 million, raising the total value of the deal to $690 million. McClatchy said it would use the money to pay down its Knight Ridder debt.

McClatchy chairman and CEO Gary Pruitt said in a written statement that the Star Tribune ``is a profitable business that has generated significant returns for the company over the years. However, as we continue to analyze our business following the Knight Ridder acquisition, it became clear that selling the Star Tribune strengthens McClatchy's competitive position.''

``This deal came about because of very specific conditions involving the Star Tribune and today's changing media landscape. We have no plans to sell any other newspapers,'' Pruitt said in an e-mail to McClatchy employees.

Avista does not own any other daily newspapers. It was founded in 2005 by seven former partners and nine former professionals from DLJ Merchant Banking Partners, the private equity affiliate of Credit Suisse Group, according to the statement announcing the sale.

``Avista is a company that believes in the future of newspapers and is strongly committed to the success of the Star Tribune,'' Publisher and President Keith Moyer told Star Tribune employees in an e-mail.

``I have had the opportunity to get to know Avista leadership quite well recently, and I can say this without hesitation: They are progressive, very smart, good-hearted people who believe that no other media platform can reach a local audience as effectively as newspapers and their product extensions,'' Moyer wrote.

Moyer said he would report to Chris Harte, a member of Avista's executive advisory board, who will also be named the newspaper's chairman.

Newspaper industry analyst John Morton found the sale ``inexplicable and disappointing.''

``The Minneapolis Star Tribune has a good reputation, has always had a good reputation. It is the kind of newspaper that you would have hoped a company like McClatchy would continue to own,'' he said.

``Clearly what is happening to McClatchy is that they are much more concerned about their overall financial performance than they are about publishing newspapers, the way I read it,'' Morton said.