Strib sale: The land, Avista’s plan, and who gets canned?
Sunday, January 07, 2007 at 12:26 pm
- 8 Comments
Calling the sale of the Star Tribune “gutsy,” the Wall Street Journal yesterday considered what buyer Avista Capital Partners’ sees in its first newspaper acquisition. Despite the Strib‘s status as McClatchy’s worst revenue generator and a paper that saw revenues decline six percent last year and circulation drop by around four percent, here’s what’s attractive:
more inside
A very cheap price — 6.5 times the paper’s cash flow — a respected brand and an industry that may be bottoming out and poised for a rebound.
But the buzz locally is the property the papers own: five blocks in the build-boom part of the Warehouse District near the Metrodome.
While the Star Tribune, buried in a story about the Minnesota Vikings, said the land value could be around $25 million, others put a far higher pricetag on it. At The Rake, media critic Brian Lambert quotes longtime Strib business reporter Mike Meyers:
“The $25 million figure for all that property is a joke. The true value is much closer to $100 million. I mean, the land under the new Target store [on Nicollet Mall] sold for $27 million in 1998.”
Do the math: a company that was purchased for $1.2 billion in 1998 and sold for $530 million in 2007, with a potential land sale worth $100 million and a hoped-for uptick in online business… seems like a safe bet for Avista.
But is it good for the Twin Cities? Nothing has been said about the sale’s potential affect on news gathering and an informed public, and only a bit more has been uttered about the fate of the paper’s employees: Avista management won’t even discuss the possibility of staff cuts. Follow the Media, though, offers this less-than-rosy assessment:
The truth is that McClatchy has seen with each passing year the cash flow dip in Minneapolis
8 Comments
Comment posted January 7, 2007 @ 11:39 pm
Do the math, indeed. This post is a bit loose with its financial terms and analysis.
“Despite the Strib’s status as McClatchy’s worst revenue generator “
Its rate of growth or profit rate may not be best, but actually, the Strib is their largest newspaper and largest revenue generator. I’d call that “best.”
“Do the math: a company that was purchased for $1.2 billion in 1998 and sold for $530 million in 2007, with a potential land sale worth $100 million and a hoped-for uptick in online business… seems like a safe bet for Avista.”
The price of the Strib in 1998 is irrelevant to whether $530M is a good deal for McClatchy. Anyone buying my old iMac could tell you that. Ditto for a “potential” land sale and a “hoped-for” uptick having anything to do with a safe bet. All you have to do it look at the Edina Realty ad in today’s Strib. They’ve yanked all their open house listings and put them online at their own site.
Finally, cash flow and profit are not the same.
Doesn’t mean your conclusions will be proved wrong, of course…
Comment posted January 7, 2007 @ 11:42 pm
But then, nobody’s perfect I meant, a good deal for Avista.
Comment posted January 8, 2007 @ 7:10 am
Thanks. Hi Charlie. Thanks for the comment. The Wall Street Journal says the paper “has been the worst-performing paper in terms of revenue for McClatchy, which paid $1.2 billion for the Minneapolis paper in 1998. The Star Tribune’s ad revenue dropped about 6% last year on a circulation decline of about 4%.” Doesn’t mean they’re not hugely profitable (here’s their 2005 annual report. Good analogy about your iMac (Bondi blue, is it?).
Comment posted January 8, 2007 @ 1:01 pm
You’re Right! Bondi Blue it is.
Your citation points out it was the WSJ that was loose with the term. To their editors, apparently a business that generates more revenue and cash flow than any other in the company’s portfolio, but is not growing, is “worst-performing” in terms of revenue.
But is a salesman with the highest sales in the company the worst-performing salesman if he doesn’t match last year? Most wouldn’t say so.
An average reader might reasonably conclude the Strib was McClatchy’s worst paper. The WSJ should have said “in terms of revenue growth.” And failing that, we will say it.
Comment posted January 7, 2007 @ 5:39 pm
Do the math, indeed. This post is a bit loose with its financial terms and analysis.
“Despite the Strib's status as McClatchy's worst revenue generator “
Its rate of growth or profit rate may not be best, but actually, the Strib is their largest newspaper and largest revenue generator. I'd call that “best.”
“Do the math: a company that was purchased for $1.2 billion in 1998 and sold for $530 million in 2007, with a potential land sale worth $100 million and a hoped-for uptick in online business… seems like a safe bet for Avista.”
The price of the Strib in 1998 is irrelevant to whether $530M is a good deal for McClatchy. Anyone buying my old iMac could tell you that. Ditto for a “potential” land sale and a “hoped-for” uptick having anything to do with a safe bet. All you have to do it look at the Edina Realty ad in today's Strib. They've yanked all their open house listings and put them online at their own site.
Finally, cash flow and profit are not the same.
Doesn't mean your conclusions will be proved wrong, of course…
Comment posted January 7, 2007 @ 5:42 pm
But then, nobody's perfect I meant, a good deal for Avista.
Comment posted January 8, 2007 @ 1:10 am
Thanks. Hi Charlie. Thanks for the comment. The Wall Street Journal says the paper “has been the worst-performing paper in terms of revenue for McClatchy, which paid $1.2 billion for the Minneapolis paper in 1998. The Star Tribune's ad revenue dropped about 6% last year on a circulation decline of about 4%.” Doesn't mean they're not hugely profitable (here's their 2005 annual report. Good analogy about your iMac (Bondi blue, is it?).
Comment posted January 8, 2007 @ 7:01 am
You're Right! Bondi Blue it is.
Your citation points out it was the WSJ that was loose with the term. To their editors, apparently a business that generates more revenue and cash flow than any other in the company's portfolio, but is not growing, is “worst-performing” in terms of revenue.
But is a salesman with the highest sales in the company the worst-performing salesman if he doesn't match last year? Most wouldn't say so.
An average reader might reasonably conclude the Strib was McClatchy's worst paper. The WSJ should have said “in terms of revenue growth.” And failing that, we will say it.
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