Big changes may be coming at Star Tribune

The Star Tribune is one of the most successful metropolitan newspapers in the nation, which may be akin to having a great cabin on the Titanic.

Joking aside, the paper has enjoyed a stirring climb from the depths since its ill-fated purchase by Wall Street investment group Avista Capital Partners. The smartest guys in the room paid more than $500 million for the paper in 2007, just as the newspaper industry’s freefall took hold in earnest. Absentee publisher Chris Harte was a disaster, and bankruptcy soon followed.

The Strib emerged from bankruptcy in late 2009 with new owners, a much smaller workforce and a greatly reduced debt load. In 2010, Time Inc. veteran Michael Klingensmith took over as publisher and led the paper back to profitability, even paying a small but well-deserved bonus to the beleaguered staff. The Strib added digital revenue via an online paywall and won two Pulitzer prizes, its first in more than 20 years.

Now, reports have surfaced that Klingensmith may be heading back to take over Time Inc.’s magazine publishing business, which will be spun off later this year as a standalone company from the entertainment giant Time Warner.

The paper could stand that loss, because it has an obvious successor in Editor Nancy Barnes. Barnes is smart and tough, with an MBA to go with her demonstrated journalism chops. If she wants the publisher’s job, I don’t see any reason she shouldn’t get it – and frankly, I think the owners would be idiots not to offer it to her.

Looking for an exit

But the larger question is who those owners will be, long-term. Wayzata Investment Partners, the private equity firm that’s now the majority owner, isn’t a long-term proprietor. The partnership invests in distressed properties and looks to sell them at a profit after a turnaround. The Strib has had its distress and its turnaround, suggesting that Wayzata Partners will soon be looking for an exit, if it’s not already.

Who would buy the Star Tribune? Your guess is as good as mine. Warren Buffett has been on a newspaper-buying spree, but his strategy is to operate in small cities with little competition from other media. The Star Tribune doesn’t look like a good fit for Buffett.

Then there’s the local deep-pockets crowd whose names usually crop up in these scenarios, Vance Opperman being a prime example. But if the locals didn’t step up to buy the paper when they had the chance earlier, I’m not sure why they would now.

Price tag?

The key question in any sale would be how high a price Wayzata Investment Partners exacts from a buyer. With the Strib seemingly operating smoothly and profitably right now, Wayzata Partners won’t be willing to sell at a bargain rate. But if the new owner pays top dollar, a round of cost-cutting (read: layoffs) could follow, upsetting the organization and ultimately devaluing the purchase. And even though the paper is performing well now, it still faces the industry-wide issue of an aging customer base and failure to make headway among young digital natives, a subject I tackled here and here.

All this is playing out against the backdrop of a potential sale of the paper’s headquarters to make way for the new Vikings stadium. It’s going to be an interesting year at 425 Portland Ave.