Seeking Alpha
Profile| Send Message|
( followers)  
Saw the announcement tonight that McClatchy, the third-largest U.S. newspaper chain by circulation, is selling its flagship newspaper service--the (Minneapolis) Star-Tribune for $530 million dollars, almost half of the $1.2 billion they paid 8 years ago when they acquired it. Earlier this year, McClatchy bought and flipped many--but not all--of the Knight-Ridder papers, making a profit that will be offset, according to Reuters, by the loss on the Star-Tribune and making the deal actually worth $690 million. McClatchy said they plans to use pay down a portion of their projected $3.3 billion debt with the sale proceeds.

According to Bloomberg, McClatchy will now have 31 newspapers in 29 markets from Anchorage to Miami with 2.76 million in daily and 3.45 million Sunday circulation. In addition, they will move from being the country's second-largest newspaper company to the third-largest , based on circulation. (Gannett Co., owner of USA Today, is the largest, followed by the Tribune Co., owner of the Chicago Tribune and Los Angeles Times, among others.)

The New York Times interviewed Gary Pruitt, McClatchy CEO, and quoted him saying: "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."

Former Trib staffer Steve Yelvington gets a quote, too:" We're in the middle of a painful, large-scale restructuring of the news business, and investor confidence has fallen sharply....Today's Star Tribune is no less of a quality product than the newspaper of eight years ago. What's different is the world around it."

Susan sez: One can't help but note Pruitt's comment on wanting money not only to pay down debt, but for "digital investments." Given that some of the local Knight-Ridder acquisitions don't really have web sites--let alone revenue producing ones--one might speculate that McClatchy wants to maximize its local ad network, especially since they have a set of Knight Ridder classified products to deploy, but then it could also make sense for them to join the Yahoo network and use the money to develop products to go after audiences--like young adults--that newspaper companies salivate for, but do not have.

Comments some writers have made about newspaper companies needing to rebalance their portfolios ring true here, but even more true is the demonstration of how newspapers--once the core communications devices for their communities--have moved away from the center and are struggling to maintain a space and a daily relevance that other information formats--like alerts, RSS feeds,blog posts and video uploads more easily command.

Source: McClatchy Selling The Trib: Sign Of Our Communication Times