Goldman Sachs Says ‘Star Tribune’ Sale a Troubling Signal for Industry

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By: E&P Staff

Early Wednesday, Goldman Sachs became one of the first newspaper industry analyst firms to analyze the shocking announcement of the pending sale of the Star Tribune of Minneapolis by McClatchy Co. to a private equity firm. In its heading, Goldman stated it plainly: “Minneapolis valuation a Bearish signal for newspaper industry.”

While McClatchy will “generate a tax benefit of about $160 million,” Goldman observes, it is also taking a hit on the sale price, having paid $1.2 billion for the paper in 1998, now selling it for $530 million.

“The substantial loss on the sale is a vivid reminder of the industry’s declining fortunes ove the last several years,” Goldman declared. “While we are intrigued that a private equity firm is showing interest in the newspaper sector, the 7.4x estimated EV/EBITDA valuation is not a Bullish indicator for the sector given a current newspaper group average 2007E valuation of about 8.7x.”

But it added: “We believe the company’s strategic rationale for the sale is straightforward,” as it “eliminates one of its slowest growing markets, reduces the proportion of its workforce that is unionized, and acelerates debt repayment.” Its overall rating of the company remains “neutral.”

The buyer is Avista Capital Partners of New York City. McClatchy bought the paper from the Cowles family in 1998.

— See links at right for other E&P stories on the Star Tribune sale.

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