McClatchy/MediaNews Deal Clears Court Hurdle

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A federal judge on Friday declined to block the proposed sale of three McClatchy Co. newspapers to rival MediaNews Group Inc. amid allegations the $1 billion deal would give the Denver-based chain a monopoly in the San Francisco-area newspaper market.

The antitrust lawsuit brought by San Francisco real estate magnate Clint Reilly was a bid to temporarily block the transaction that also includes financing from the Hearst Corp., which owns the San Francisco Chronicle and would be the biggest competitor to MediaNews in the Bay Area.

The newspapers in the McClatchy-MediaNews deal include the Monterey County Herald, San Jose Mercury News and Contra Costa Times. MediaNews, which claims the Denver Post in its 40-paper inventory, also would get the St. Paul Pioneer Press in Minnesota under a complex deal that involves financing from Hearst.

Still, U.S. District Judge Susan Illston’s decision doesn’t mean the deal will go through.

Regulators in the Justice Department have not signed off on the deal and he government has not indicated when it would conclude its own antitrust investigation. MediaNews’ lawyers told Illston that the deal needs to get closed within days as financing agreements begin expiring.

Gary Pruitt, McClatchy’s chairman and CEO, said the company is waiting for Justice Department approval before closing the deal.

Despite Reilly’s concerns that MediaNews could have a monopoly on readership and advertising, Illston ruled that newspapers face competition from other news sources that also advertise.

“As an initial matter, there will continue to be other sources that continue to provide consumers with ‘news, editorial, entertainment and advertising content’ such as the television, radio and the Internet,” Illston ruled.

The judge left open the possibility that she would entertain arguments in the future challenging the assumption.

Joseph Alioto, Reilly’s attorney, did not immediately return calls for comment.

Sacramento-based McClatchy got the papers targeted in Reilly’s suit as part of its $4 billion acquisition of San Jose-based Knight Ridder Inc., a takeover completed last month that included $2 billion in debt assumption.

McClatchy subsequently struck deals to sell 12 of Knight Ridder’s former 32 daily papers for $2 billion. The biggest deal concerns the transaction targeted by Reilly’s suit.

MediaNews already owns eight San Francisco Bay area newspapers, including the Oakland Tribune.

McClatchy, the second-largest newspaper publisher in the country, disclosed in a regulatory filing Friday that it paid several of its top executives bonuses following the completion of the company’s acquisition of Knight Ridder.

Pruitt, the chairman, received a bonus of $1 million, while Patrick Talamantes, the chief financial officer, got a bonus of $250,000. Howard Weaver, the vice president of news, got $125,000, and two vice presidents of operations, Robert Weil and Frank Whittaker, each received $100,000, the company said in a filing with the Securities and Exchange Commission.

Reilly, a former San Francisco mayoral candidate, unsuccessfully sued to block the 2000 sale of the Chronicle to the Hearst Corp.

Hearst paid $660 million for the Chronicle. But to assuage antitrust concerns, it gave away its flagship San Francisco Examiner and subsidized the Examiner’s new owners with $66 million over three years.

The case is Reilly v. MediaNews Group, 06-4332.


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