McClatchy Facing $163,000 Daily Bill if Newspaper Sale Is Blocked

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McClatchy Co. expects to lose about $163,000 per day if a federal judge blocks the publisher’s sale of three northern California newspapers to MediaNews Group Inc., which is banking on the deal to give it more regional clout.

Patrick Talamantes, McClatchy’s chief financial officer, estimated the company’s potential loss in a sworn declaration filed Monday in response to a motion asking U.S. District Judge Susan Illston to prevent MediaNews from taking over the San Jose Mercury News, Contra Costa Times and Monterey Herald.

MediaNews, whose stable of 40 daily papers includes the Denver Post, also would get the St. Paul Pioneer Press under a complex deal that also involves the Hearst Corp., the owner of the San Francisco Chronicle.

San Francisco real estate investor Clinton Reilly, who complicated the Chronicle’s sale in a messy legal spat six years ago, sued two weeks ago in an effort to force McClatchy to scrap the deal it worked out with MediaNews and Hearst in April.

A hearing on Reilly’s injunction request is set for Thursday afternoon in Illston’s San Francisco courtroom.

Sacramento-based McClatchy inherited the papers targeted in Reilly’s suit as part of its $4 billion acquisition of Knight Ridder Inc., a takeover completed last month.

Looking to minimize its debt, McClatchy struck deals to sell 12 of Knight Ridder’s 32 daily papers for a total of $2 billion. The biggest transaction involves the three Northern California papers and the St. Paul Pioneer Press.

If that $1 billion sale doesn’t go through as planned, McClatchy will be saddled with additional debt that will cost the company $163,000 per day, Talamantes said in the deposition. That, in turn, could hurt McClatchy’s credit rating, costing it more for any future loans.

Talamantes also warned a delay in the MediaNews deal could provoke labor strife at the San Jose paper, where labor contracts covering about 600 workers expired June 30.

Denver-based MediaNews already owns eight other San Francisco Bay area newspapers, including the Oakland Tribune.

Adding the three additional papers currently owned by McClatchy would give MediaNews a combined weekday circulation of more than 700,000 in the region, far more than the San Francisco Chronicle, the area’s biggest paper.

Reilly alleges the proposed sale would hurt readers and advertising by ceding too much control over local information and newspaper prices to MediaNews and New York-based Hearst.

The U.S. Justice Department and California Attorney General also is reviewing whether McClatchy’s proposed sale of the northern California papers would violate antitrust laws.

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