Denver-based ap Inc. announced a $1 billion deal Wednesday to acquire three newspapers in northern California and one in Minnesota from the McClatchy Co.
The deal puts MediaNews among the top four newspaper chains in the country by total daily circulation, surpassing The New York Times Co. and Dow Jones & Co., publisher of The Wall Street Journal.
“It feels great,” said Media News chief executive and Denver Post publisher William Dean Singleton, adding, “I don’t expect that we’ve quit growing.”
Singleton spoke Wednesday to the newsroom of the San Jose Mercury News – the biggest of the four papers being acquired – and sketched a vision of newspapers transformed by information technology.
“Newspapers are uniquely positioned to own their local markets, in every aspect … whether it be print, online or search,” said Singleton, according to the Mercury News.
He raised the possibility of newspapers partnering with companies such as Google and Microsoft.
“One way or another, newspapers need a technology plan in order to do this right,” he said.
Singleton said no job cuts were planned as a result of the deal announcement but added that “those decisions are based on local conditions” at each newspaper.
Singleton’s deal with McClatchy comes six weeks after McClatchy – based in Sacramento, Calif. – bought Knight Ridder Inc. for $4.5 billion plus $2 billion in debt, triggering a dramatic realignment of the newspaper industry.
MediaNews, previously the nation’s seventh-largest newspaper publisher and owner of The Denver Post, will acquire the Mercury News and the Contra Costa Times from McClatchy as part of a long-term strategy to cluster newspapers and business operations in the San Francisco Bay Area.
Separately, New York-based Hearst Corp. will acquire two other papers from McClatchy: the Monterey Herald in northern California and the St. Paul Pioneer Press in Minnesota. Hearst will put those papers into MediaNews for an equity stake in Media News’ assets outside the Bay Area.
“We believe that MediaNews is a very well-run company,” said Paul Luthringer, a Hearst spokesman in New York. “A minority investment is very attractive, and that’s why we consummated the deal.”
The $1 billion figure encompasses the entire deal for the four newspapers. Dollar values of each newspaper were not disclosed.
Gannett Co., the nation’s No. 1 newspaper publisher, and Stephens Media, based in Las Vegas, also contributed capital because of pre-existing partnerships with MediaNews.
ap president Jody Lodo vic said the deal’s structure helps ease antitrust concerns. Hearst owns the San Francisco Chronicle.
The three-way deal is expected to close by midsummer and requires regulatory review.
If the deal fails to pass regulatory muster, MediaNews would purchase the two papers from Hearst directly, Lodovic said.
At the deal’s closing, MediaNews would have a daily circulation of 2.7 million and a Sunday circulation of 3 million – with 53 daily newspapers nationwide, the company said.
The four papers are being sold by publicly traded McClatchy, which agreed to acquire 32 papers last month from San Jose- based Knight Ridder. After agreeing to that deal, McClatchy said it would sell 12 papers that did not mesh with its strategy.
Larry Grimes, president of W.B. Grimes, a media investment bank in Gaithersburg, Md., described Wednesday’s purchase of the four papers as “a logical move” for Media News.
“It’s a great add-on for them,” Grimes said. “It strengthens their position in California.”
Before the deal, MediaNews owned 22 papers in California.
MediaNews paid 11.5 times 2005 earnings before interest, taxes, depreciation and amortization.
In its deal with Knight Ridder, McClatchy paid 9.5 times 2005 EBITDA. Based on that, Grimes said, “it looks like a good deal” for McClatchy.
“That spread pays off a lot of debt for McClatchy,” he said.
Lodovic said comparing the two valuations “is like comparing apples to oranges.” He said McClatchy will have to pay a hefty tax bill in its Knight Ridder deal. He said MediaNews will receive significant tax benefits.
Denver Post staff writer Kimberly S. Johnson and San Jose Mercury News staff writer Pete Carey contributed to this report.
Company’s biggest
ap newspapers with the largest daily circulation totals, pending Wednesday’s proposed deal to acquire four papers from the McClatchy Co.:
Source: Audit Bureau of Circulation
Leading chains
The nation’s top five U.S. newspaper companies by daily circulation totals, pending proposed deals:
*-pending purchase of Knight Ridder
**-pending McClatchy acquisitions
Source: Morton Research Inc.
