The Star Tribune is being sold by The McClatchy Company to private equity firm Avista Capital Partners, McClatchy and Avista announced today. The companies say they have a definitive agreement to sell the Star Tribune for $530 million to Avista, which has offices in New York and Houston.
McClatchy said it decided to sell the Star Tribune through a private bidding process after a strategic reevaluation of its portfolio of holdings in the wake of its recent acquisition of Knight Ridder, a newspaper company more than twice its size. The Knight Ridder deal was valued at $4.5 billion.
McClatchy bought the Star Tribune from the Cowles Media Company in 1998 for a net price of $1.2 billion, after selling off Cowles magazine and book publishing businesses.
Gary Pruitt, chairman and CEO of McClatchy said 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 McClatchys competitive position.
Avista 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. Avista specializes in investing in growth-oriented media, healthcare and energy companies. Avista currently does not own other daily newspapers but reportedly was an unsuccessful bidder for the Philadelphia Inquirer and Philadelphia Daily News, which McClatchy sold last June.
When the deal closes, Chris Harte, a member of Avistas executive advisory board, will serve as chairman of a board of directors that will oversee the Star Tribune. Harte is a former newspaper executive whose grandfather was cofounder of the Harte-Hanks Inc. in San Antonio, Texas, a company that started as a newspaper company and has since become a direct marketing company.
Harte was an executive with Knight Ridder, serving as publisher in Akron, Ohio and State College, Penn., and with Guy Gannett Communications as publisher of the newspapers in Portland, Maine.
Harte said he expected the Star Tribune management team to remain intact, with current Publisher and President Keith Moyer continuing to lead the newspaper and also serve on the newspapers board.
We are excited to be partnering with the strong management team at the Star Tribune, Harte said. We believe there is a great future for newspapers like the Star Tribune that produce an excellent local product for their communities and are focused on what readers want. Furthermore, the Star Tribune does a terrific job of making its content available over the Internet and in other forms.
When McClatchy bought Knight Ridder this year it quickly divested 12 of the newly acquired newspapers. Those gains will be offset by tax savings from the sale of the Star Tribune. McClatchy CFO Pat Talamantes said the company would capture an additional $160 million in tax benefits, bringing the total value of the deal to McClatchy to $690 million, which will be used to pay down debt from the Knight Ridder purchase.
The fact that McClatchy is in a position to capture $160 million in addition to the sale proceeds because of favorable tax conditions made selling at this time compelling, Talamantes said.
The Star Tribune is the 14th largest daily newspaper in the country with a circulation of 361,172, and it is the 10th largest Sunday newspaper with circulation of 596,333. It also operates StarTribune.com, which is the leading local online site in the Twin Cities with a 36 percent reach of all adults.