McClatchy (MNI - Get Report) has agreed to sell Minneapolis' Star Tribune newspaper to private equity group Avista Capital Partners for $530 million.

McClatchy said in a press release Tuesday that it also expects a future tax cash benefit of about $160 million related to the sale by applying a tax loss arising from this deal against tax gains generated by McClatchy's sale earlier this year of 12 newspapers formerly owned by Knight Ridder.

The transaction is expected to close in the first quarter of 2007. McClatchy plans to use the sale proceeds to pay down debt from the Knight Ridder purchase.

McClatchy purchased the Star Tribune from Cowles Media in 1998 for $1.2 billion, after taking into account McClatchy's concurrent sale of Cowles' magazine and book publishing businesses.

The Star Tribune is the largest newspaper in Minnesota, with daily circulation of 361,172.

Shares of McClatchy closed Tuesday up 1.9% to $43.07.