Tuesday, October 23, 2007

MediaNews stake costs Hearst $317 million

The relationship between the Bay Area's biggest newspaper companies, Hearst Corp. and MediaNews Group, has become a little more cozy. Hearst has paid $317 million for a 31 percent stake in MediaNews Group's newspaper holdings outside of the Bay Area, MediaNews said in a filing with the Securities and Exchange Commission posted on Monday.

The transaction had been announced last year, but the deal closed on Friday and previously undisclosed details were reported in Monday's SEC filing.

As part of the deal, MediaNews will give back $290 million to Hearst in return for three newspapers it owns, The Monterey County Herald, St. Paul (Minn.) Pioneer Press and the Torrance Daily Breeze. MediaNews has been operating the papers for Hearst since last year. As a result, the actual amount of cash Hearst paid MediaNews was only $27 million in cash, the filing said.

The transaction appears to be the final action in a deal that began last year when Knight Ridder sold its assets to McClatchy Co. McClatchy spun off KR's Bay Area newspapers, including the Mercury News and Contra Costa Times, to MediaNews, which already owned several Bay Area papers including the Oakland Tribune and San Mateo County Times. McClatchy sold the Pioneer Press and Monterey paper to Hearst with the understanding that MediaNews would operate those papers and eventually buy them from Hearst. In return, Hearst would get a piece of MediaNews Group's holdings outside the Bay Area.

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