By Steve Perry
City Pages
Published: 1/8/2007
Excerpt:
When the McClatchy Company bought the
Star Tribune from longtime local
owners Cowles Media in March 1998, the transaction set a new high-water
mark for newspaper sticker prices. The $1.2 billion McClatchy coughed
up for the paper amounted to roughly 16 times the
Strib's operating
cash flow -- its gross profits, essentially, before the additional costs
of taxes and interest and sundry other accounting tricks were applied.
Analysts routinely calculate newspaper values as a fluctuating multiple
of the paper's cash flow, and no one had ever paid such a staggering
premium for a single newspaper, let alone a "minor major" like the
Strib. The price tag suited McClatchy CEO Gary Pruitt just fine, he
assured the paper's ace business reporter, the late Terry Fiedler:
"We're not in this to buy on the cheap and operate on the cheap."
No. He was only in it to
sell
on the cheap, as it turned out. The December 26 punting of the
Star
Tribune to Avista Capital Partners set a new industry benchmark of its
own, as the new record low price for a prominent daily newspaper. ...
... Media analyst
Rick Edmonds thinks it's entirely plausible that
big-market economics played a role in McClatchy's decision. "After the
sale was announced, [Media News CEO and Pi-Press manager] Dean
Singleton made the comment, why would you sell your biggest paper? But
you could say that if you're going to sell something, why
not sell your biggest paper? That's the most problematic part of the industry now."
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