SACRAMENTO,CA, DECEMBER 4, 2003 - The McClatchy Company today reported that it has entered into an agreement to purchase the assets of the Merced Sun-Star, a daily newspaper in Merced, California, and five nearby non-dailies for $40.5 million in cash from Pacific-Sierra Publishing, Inc. The transaction is expected to be completed in January 2004.
The Merced Sun-Star has five-day circulation of 17,400 and weekend circulation of 21,500, and the newspaper group had revenues in its fiscal 2003 (ending March) of $12.6 million. The acquisition is expected to be accretive to McClatchy’s earnings in its first year by one cent per share. The purchase price multiple of first-year cash flow is expected to be between 13 and 14 times. The multiple is expected to be between 10 and 11 times after adjusting for the value of the tax savings from armortizing acquisition-related intangible assets for tax purposes.
Dirks, Van Essen & Murray, a newspaper merger-and-acquisition firm in Santa Fe, New Mexico, represented Pacific-Sierra Publishing in the transaction.
Gary Pruitt, McClatchy’s chairman and chief executive officer, said, “We are excited about adding the Merced Sun-Star to our family of newspapers. The Merced Sun-Star has a long and proud history of serving the city of Merced and Merced County, and we plan to continue and advance that heritage. We believe the Sun-Star is a good strategic fit with our group of newspapers in the Central Valley. "
“We have described our exacting criteria for newspaper acquisitions many times: they must be in growth markets, be cash flow positive and accretive to earnings in the short term, be in a market not dominated by another newspaper, and be a newspaper to which we can add value through revenue growth and operational efficiencies. The acquisition of the Sun-Star clearly meets these criteria.”
The Merced region has evolved over the last decade into a fast-growing market. It is located just 40 miles south of Modesto, home to McClatchy's Modesto Bee newspaper, and 60 miles north of Fresno, home to its Fresno Bee newspaper. Merced's population is projected to grow 33% faster than the national average. Merced’s retail base is rapidly expanding to match the population growth, with several new retailers opening stores in the market.
Pruitt said, “Our strategy for growing Merced Sun-Star’s business is simple. We will devote resources to continue to improve the journalistic quality of the newspaper for readers and will offer programs to advertisers that help them drive results and achieve their goals. We expect to extend the very successful direct mail programs that already exist at our three Bee newspapers to the existing program at the Sun-Star, to further develop the online synergies and opportunities at www.mercedsun-star.com, the newspaper’s website, and to take advantage of cost savings with newsprint, administrative functions, and capital programs among the Bee newspapers and the Merced Sun-Star.”
Anthony Allegretti, the Pacific-Sierra Publishing’s President and CEO, said “ We are pleased to sell the Merced Sun-Star to McClatchy. We believe that the Sun-Star will have a home with a company that cares deeply about this area, about the editorial product and employees of the newspaper.”
The non-daily newspapers to be purchased by McClatchy include the Sierra Star in Oakhurst, the Los Banos Enterprise, the Chowchilla News, the Atwater Signal and the Livingston Chronicle.
The McClatchy Company, headquartered in Sacramento, California, is a leading newspaper and Internet publisher. It publishes 11 daily and 11 non-daily newspapers located in western coastal states, North and South Carolina and the Twin Cities of Minneapolis/St. Paul. McClatchy has daily circulation of 1.4 million and Sunday circulation of 1.9 million. McClatchy's newspapers include, among others, the Star Tribune in Minneapolis, The Sacramento Bee, The Fresno Bee and The Modesto Bee in California, The News & Observer (Raleigh, NC), The News Tribune (Tacoma, WA) and the Anchorage Daily News.
McClatchy also publishes a leading local website in each of its 11 daily newspaper markets, offering readers information, comprehensive news, advertising, e-commerce and other services. McClatchy owns and operates Nando Media, a national on-line publishing division. McClatchy is listed on the New York Stock Exchange under the symbol MNI.
For further information contact Philip Murray at Dirks, Van Essen & Murray, phone 505/820-2700, fax 505/820-2900.