McClatchy Co. said Tuesday that it would sell its flagship newspaper, the Star Tribune in Minneapolis, to a private equity firm for $530 million, less than half the $1.2 billion the company paid to acquire the paper eight years ago.
McClatchy said it decided to sell the daily newspaper to Avista Capital Partners through a private auction "after a strategic reevaluation of its portfolio of holdings" following the Sacramento-based company's purchase of Knight Ridder Inc. for $4.5 billion this year.
McClatchy faces a large tax bill from selling 12 other newspapers after buying Knight Ridder. It said the tax benefit of selling the Star Tribune at a loss would amount to $160 million.
McClatchy Chief Executive Gary Pruitt said in a 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.
New York-based Avista does not own any other daily newspapers. It was founded in 2005 by former partners and employees of DLJ Merchant Banking Partners, the private equity affiliate of Zurich-based financial services giant Credit Suisse Group, according to the statement announcing the sale. Avista focuses on investments in energy, healthcare and media, according to its website.
"Avista is a company that believes in the future of newspapers and is strongly committed to the success of the Star Tribune," Publisher Keith Moyer told Star Tribune employees in an e-mail.
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.
McClatchy purchased the Star Tribune in 1998 from Cowles Media Co. The paper's Sunday circulation has fallen to 596,333 from 673,000 in 1997.