Hearst Shelling Out $299 Million in Next Phase of MediaNews Deal

By: Hearst Corp. has agreed to pay $299 million to MediaNews General Inc. in the next phase of a complex deal aimed at creating partnership between the two newspaper publishers outside the San Francisco Bay area.

If the $299 million investment is completed, MediaNews has agreed to return a chunk of the money to buy the St. Paul Pioneer Press and Monterey County Herald from Hearst, according to a Securities and Exchange Commission filing earlier this week.

Hearst bought the Minnesota and Monterey papers from McClatchy Co. earlier this month with the intention of turning them over to MediaNews. New York-based Hearst paid $263 million for the two papers.

If Denver-based MediaNews matches the earlier sales price, Hearst's net cost in the transaction will be about $36 million. The SEC documents don't specify how much money MediaNews will pay for the papers.

In return for its money, Hearst will receive a 30 percent stake in MediaNews' newspapers outside the San Francisco area.

The proposed partnership, which still requires regulatory approval, would create an unusual arrangement because Hearst and MediaNews would share common interests in much of the country while they competed in the Bay Area, where they own the region's largest paper.

Hearst owns the single largest paper in the area, the San Francisco Chronicle, with about 400,000 subscribers. But MediaNews's collection of mostly suburban papers in the Bay Area now has about 700,000 paid readers, with the recent addition of the San Jose Mercury News and Contra Costa Times, which were purchased from McClatchy for $737 million earlier this month.

The U.S. Justice Department plans to review whether the business alliance between Hearst and MediaNews outside the Bay Area violates antitrust laws. If regulators block the partnership, MediaNews would still be required to buy the Minnesota and Monterey papers with alternative financing, according to the SEC filing.