Records show Hearst interest in MediaNews 

The owner of the San Francisco Chronicle discussed selling the paper to its East Bay competitor for two months in 2005, but backed away because the two companies couldn’t agree on a price for the money-loser that is nevertheless the highest-circulation paid daily in Northern California.

In a Sept. 28, 2006, deposition before the U.S. Department of Justice Antitrust Division, Hearst Corp. senior VP and Chief Legal and Development Officer James Asher said that for two months in 2005 his company explored selling the Chronicle to MediaNews Group Inc. of Denver, owner of the Oakland Tribune and other area newspapers.

"The proposed terms were totally unacceptable to us from a business perspective, so those discussions did not … continue for very long," Asher said. "The difficulty is, we had a business that had established a long track record of losing money and it is very difficult to — we still believed there was substantial value."

MediaNews newspapers at the time included nearly every Bay Area paid-circulation daily except the Contra Costa Times group and the San Jose Mercury News. In 2006, MediaNews bought those two in a deal financed partly by Hearst, which is now contested in court.

The discussions became public this week through that case, Clinton Reilly v. MediaNews Group Inc. et al. Reilly, a San Francisco businessman, maintains that MediaNews’ complicated purchase of the Contra Costa Times and the San Jose Mercury News carves up the Bay Area between Hearst and MediaNews, creating a virtual monopoly and stifling competition that could hurt both readers and advertisers with higher prices and less service. Hearst and MediaNews counter that newsgathering will remain competitive, and the defendants have argued that their proposed cooperation for national advertising sales are common in the industry.

Asher’s deposition and other documents were unsealed this week due to legal intervention by the San Francisco Bay Guardian and the nonprofit Media Alliance.

"As thedeposition testimony makes entirely clear when read in context, there was no serious effort to sell the San Francisco Chronicle to MediaNews Group or anyone else," Hearst spokesman Paul Luthinger said via e-mail.

Reilly’s attorney Joseph Alioto characterized the testimony as "shocking," but declined further comment.

Court records show Hearst executives admired MediaNews and long sought to invest in the firm, dating to an earlier deal involving two Houston newspapers. Hearst’s $300 million investment as part of the 2006 deal represented 30 percent ownership of MediaNews’ non-Bay Area operations, and Hearst executives actively hoped for a federal green light that would let it later invest in the Bay Area papers, too, according to a July 26, 2006, memo to Hearst CEO Victor Ganzi. Such permission would have made Hearst 24 percent owner of all of MediaNews. Hearst hoped to increase that ownership over time, according to the memo.

kwilliamson@examiner.com

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