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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