MediaNews Adds 4 Newspapers in Deal With McClatchy and Hearst

Gary Pruitt, CEO of the McClatchy Co., left, and Dean Singleton, CEO of MediaNews Group, laugh as they address the annual American Society of Newspaper Editors annual convention on Tuesday in Seattle. (Elaine Thompson - AP)

MediaNews Group Inc., the Denver-based publisher of more than 40 daily newspapers, will take ownership of four newspapers in a complex $1 billion transaction involving the Hearst Corp. that will expand media mogul Dean Singleton's presence in Northern California.

Under the deal announced yesterday, Singleton's MediaNews will purchase the San Jose Mercury News and Contra Costa Times, which are in the suburbs of San Francisco, while Hearst will buy the Monterey Herald, also in Northern California, and the St. Paul Pioneer Press in Minnesota. The four newspapers in the deal are owned by Knight Ridder Inc., which McClatchy Co. is in the process of buying.

In a separate agreement, Hearst will turn over the Pioneer Press and the Herald to MediaNews in exchange for an equity investment in MediaNews' assets, excluding those in the San Francisco Bay area. Hearst owns the San Francisco Chronicle.

"Given the growth characteristics of these newspapers and the favorable tax benefits from the asset treatment of the purchase, we believe this transaction represents a wonderful opportunity at a fair price," Singleton, chief executive of MediaNews, said in a statement.

After the purchase, MediaNews, which publishes the Denver Post and the Detroit News, will become the nation's fourth-largest newspaper chain, with 53 daily newspapers and a combined circulation of 2.7 million. The acquisitions of the newspapers in the San Francisco Bay area add about 500,000 in daily circulation.

The deal follows MediaNews' strategy to cluster suburban newspapers around the nation, an arrangement that is attractive to retail advertisers who can offer bundled ad packages to the news organization.

"The real advantage here is to enlarge the audience to advertisers," said John Morton, head of media consulting firm Morton Research Inc. in Silver Spring.

Three of the newspapers -- the San Jose Mercury News, the Monterey Herald and Contra Costa Times -- join a handful of other community newspapers already owned by MediaNews in the suburban cities that surround San Francisco.

Sacramento-based McClatchy agreed in March to acquire 32 newspapers owned by San Jose-based Knight Ridder for $4.5 million and immediately announced that it would sell 12 of the newspapers that it thought were not in growth markets, including the four involved in yesterday's transaction.

The Knight Ridder sale, scheduled to close later this year, and yesterday's transaction are subject to regulatory approval.

McClatchy faced potential antitrust problems in owning the St. Paul Pioneer Press because it already owns the Star Tribune in neighboring Minneapolis. McClatchy said yesterday that the Department of Justice told the company it would seek additional information about the purchase of Knight Ridder's newspapers only as it relates to the Minneapolis-St. Paul area, indicating that regulators didn't see antitrust concerns in other areas.

"We are doing exactly what we said we would do when we announced our planned divestitures: end uncertainty for these newspapers and their employees and let new owners start building futures as quickly as possible," McClatchy chief executive Gary B. Pruitt said in a statement.