Two Bay Area newspapers sold to MediaNews

By Julia Cheever, Bay City News Service

August 3, 2006

The sale of the San Jose Mercury News and Contra Costa Times by the McClatchy Co. to MediaNews Group Inc. was completed yesterday, McClatchy announced.

The two newspapers will be added to eight other Bay area newspapers, including the Oakland Tribune, owned by Denver-based MediaNews.

The sale is part of a $1 billion deal in which a partnership controlled by MediaNews will acquire four newspapers from McClatchy.

The other two newspapers in the deal, the Monterey County Herald and St. Paul Pioneer Press of Minnesota, were sold to the Hearst Corp., which also owns the San Francisco Chronicle.

MediaNews will manage the Monterey and St. Paul papers and will eventually buy them from Hearst under a not-yet-negotiated arrangement, which could be a stake in MediaNews operations outside the Bay area.

The sale recently passed two legal hurdles. Last week, a federal judge turned down a request by San Francisco businessman Clint Reilly for a temporary restraining order blocking the sale.

Reilly claims in an antitrust lawsuit, which is still pending, that the transfer will result in higher subscription and advertising rates and lower quality because competition will be decreased.

The second hurdle was passed on Monday when the antitrust division of U.S. Justice Department approved the sale, concluding that "the transaction is not likely to reduce competition substantially."

The department found that there is relatively little overlap among the Mercury, Contra Costa Times and other papers owned by MediaNews and that the newspapers will continue to face competition from the Chronicle.

A separate state antitrust investigation is still pending, according to Tom Dresslar, a spokesman for California Attorney General Bill Lockyer.

But state approval, unlike federal approval, was not required before the sale could go through.

Dresslar said the outcome of the state probe could be a decision that competition would not be harmed or it could be a lawsuit or a call for mediation of any concerns identified by the state.

McClatchy, headquartered in Sacramento, acquired the four newspapers as part of its $4 billion purchase of San Jose-based Knight Ridder Inc. earlier this year.

Including those four publications, McClatchy has now divested itself of a total of 12 of the former Knight Ridder papers, the company said in its announcement.

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