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January 9, 2007 / Toby Dayton

One Daily Paper In The Twin Cities?

I had a good conversation yesterday with a local venture capitalist about McClatchy’s recent sale of the Star Tribune to Avista Capital Partners. He made some interesting observations about the recent daily newspaper transactions in this market and posed some good questions. When McClatchy sold the St. Paul Pioneer Press acquired through the Knight-Ridder acquisition because of anti-trust concerns, they most likely had every intention of holding onto the Minneapolis Star Tribune (unless the horrid economic performance of the Pioneer Press was the real reason they sold it, not the anti-trust issues). So what changed in the subsequent months that made them decide to unload the Star Tribune? It could not have been the attractiveness of the ‘surprise’ offer they received from Avista – the eventual sale price wiped out $670 million in shareholder value from their purchase price just 8 years ago. Of course, they might have determined that the low price offered was still higher than their own internal valuation or that it was only going to erode further in the future and they might as well sell it now for what would most likely be the highest price they could ever get for a declining asset.

The other point of discussion was why there are still two daily papers in this market. With both papers having changed hands in the past year (The Pioneer Press twice), it seems strange that after the dust has finally settled, they are still owned by different companies. Given the flurry of M&A activity in the space and the brutal issues facing daily papers today, it would make sense that the two papers would have eventually been merged. McClatchy had the chance and elected not to combine them, for whatever reason. And now, the prospects are once again dim that a single daily paper will serve the entire Twin Cities anytime soon. Despite the abuse that daily papers have taken in the recent past, much of it deserved, I still feel that a strong daily newspaper remains an important component in the fabric of a community. Unfortunately once again, we have two dailies, neither of which is locally-owned, presiding over antiquated business models with declining readership and deteriorating market share, all the while slashing costs, reducing the quality of their newsrooms, and competing against one another in a desperate tailspin that might end up killing them both. What a shame.

[tags]Death of Newspapers, Decline of Dailies, Newspaper Monopolies, McClatchy, Avista Capital Partners, Pioneer Press, Media M&A Activity[/tags]

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