• by Erik Sass  @eriksass1, December 28, 2006

The McClatchy Company announced Tuesday that it is selling the Minneapolis Star Tribune to Avista Capital Partners, a private-equity firm, for $530 million. The sale--set to close by the end of the first quarter of 2007--is another notch on the belt of private equity, which has been acquiring media properties at a feverish pace over the last year. McClatchy plans to use the cash to pay down the debt from its purchase of Knight Ridder in March.

Although McClatchy has already sold 12 papers formerly belonging to Knight Ridder, this is the first McClatchy property to get the ax. In addition to the sale price, McClatchy said it expects to reap a tax benefit of $160 million as a result of the sale. The tax loss associated with the sale will balance out part of the tax burden McClatchy assumed by selling the Knight Ridder newspapers. McClatchy says the gain will be used to bankroll investments in new opportunities, including digital media.

Even with a total value of $690 million, the sale represents a loss for McClatchy; the company paid $1.2 billion for the paper in 1998.

OhSang Kwon, a partner with Avista Capital Partners, touted the Star Tribune's strengths: "With an exceptional brand, presence in a strong demographic market, a rapidly growing internet platform and an experienced management team, the Star Tribune represents a very attractive asset among major metropolitan newspapers."

In recent months, private-equity firms have also purchased the Reader's Digest Association, Clear Channel Communications and Penton-Prism Business Media. And various firms--and a few high-profile billionaires--have also expressed interest in certain newspapers owned by the Tribune Company, including the Los Angeles Times and The Baltimore Sun.

Earlier this year, a group of private investors purchased The Philadelphia Inquirer and Philadelphia Daily News.

McClatchy Company will now be the third-largest newspaper company in the U.S., with 31 daily newspapers and approximately 50 non-dailies.