Analysts cheered McClatchy Co.’s sale of the Star Tribune newspaper on Wednesday, saying the move will provide a tax benefit and allow it to step away from a flailing market.
The second-largest U.S. newspaper publishing company said on Tuesday that it planned to sell the Star Tribune, its largest newspaper, to private equity firm Avista Capital Partners for $530 million. McClatchy purchased the Knight Ridder newspaper chain earlier this year for $4.5 billion.
UBS analyst Brian S. Shipman said in an analyst note that McClatchy will see an estimated $160 million in future tax benefits from the deal.
“The transaction was driven by both compelling tax considerations as well as McClatchy’s desire to rid itself of one of the worst performing newspapers in order to embolden its digital and internet investing strategy,” he wrote.
Debra Schwartz, an analyst with Credit Suisse, said Star Tribune, which serves the Midwest, is dragging down McClatchy’s overall revenue growth. Revenue growth at its Midwest properties is down 4.3 percent year-to-date. If these results were excluded, the company’s overall growth would be up 1.5 percent, she said in a client note.
Shedding the newspaper will also reduce the amount of unionized workers at McClatchy, Schwartz said, as the Star Tribune has an approximately 65 percent unionized work force.
Analyst Peter P. Appert of Goldman Sachs said McClatchy is taking a significant loss on the sale, as it bought the Star Tribune in 1998 for $1.2 billion.
“We believe the company’s strategic rationale for the sale is straightforward: McClatchy eliminates one of its slowest growing markets, reduces the proportion of its work force that is unionized and accelerates debt repayment,” he said in a client note.
Shares of McClatchy fell 13 cents to $42.94 in morning trading on the New York Stock Exchange.