Avista Capital buys Star Tribune for $530mn

A leading private equity firm, Avista Capital Partners on Tuesday entered into a definitive agreement to acquire The Star Tribune Company from its publisher, The McClatchy Company for $530 million.

The Star Tribune, which is the leading information provider in the Minneapolis/St. Paul metropolitan area and includes the Star Tribune newspaper, StarTribune.com and other print and digital products and services, was bought by McClatchy in 1998 for a net price of $1.2 billion from the Cowles Media Company.

McClatchy Co., which is getting much lower price for its flagship property, said it decided to sell the Star Tribune through a private bidding process because it would help reduce its debt after the purchase of the Knight Ridder, a newspaper company more than twice its size, for more than $4 billion.

Lagging performance of the paper and the tax advantages from the sale were the other factors cited by the American publishing company. At the time of deal with the Knight Ridder newspaper chain the US publisher immediately sold off 12 newspapers for a profit, which generated a tax bill that the company says will be offset by the loss on the Star Tribune.

Besides the offer price, McClatchy said it would receive a tax benefit of $160 million from the sale, raising the total value of the deal to $690 million. McClatchy plans to use the money to settle a portion of its projected $3.3 billion debt.

On the sale of The Star Tribune, McClatchy Chairman and CEO Gary Pruitt said, “It was a drag on the bottom line and we felt we would do better without it. We could also pay down debt and be more flexible to make digital investments, the quality of the other papers could be improved and the price we would get would be enhanced by this unique tax position it was in.”

The company has no plans to sell any other newspapers, Pruitt said.

After the completion of the acquisition deal, Chris Harte, a member of Avista’s executive advisory board, will serve as chairman of a board of directors that will keep watch over the performance of the Star Tribune, while the newspaper's senior management team will remain in place.

Speaking on Avista’s purchase of The Star Tribune, the nation's 15th largest paper with a circulation of 358,887, OhSang Kwon, a partner at Avista said, “We think it's just a good time to buy. I think they've been oversold," adding that "They're terrific platforms, they have very broad reach, and we think they're going to be around for a long long time."