McClatchy closes sale of Minneapolis paper

By Dale Kasler
Sacramento Bee Staff Writer
The McClatchy Co. completed the sale of its largest newspaper Monday, as a private equity firm took ownership of the Star Tribune of Minneapolis.

Sacramento-based McClatchy, which owns The Bee, sold the Star Tribune to Avista Capital Partners for $530 million in cash plus an estimated $160 million in tax benefits. The total price of $690 million is a little more than half what McClatchy paid for the paper in 1998, prompting some investment analysts to say the price was too low.

But McClatchy Chairman and Chief Executive Gary Pruitt has defended the deal, saying it's a more than fair price given the current climate for newspapers. As a multiple of cash flow, the price is higher than what McClatchy paid for Knight Ridder Inc. last year. It's also higher than the after-tax price that McClatchy received for the 12 Knight Ridder papers it sold, Pruitt said in a recent interview.

McClatchy sold the paper because of its deteriorating advertising revenue. The Star Tribune, though profitable, had become McClatchy's "worst performing paper," Pruitt said.

The deal makes McClatchy the nation's third largest newspaper chain, behind Gannett Co. and Tribune Co.

McClatchy stock was trading at $36.49, down 38 cents, on the New York Stock Exchange.