Judge inclined not to block Bay Area newspaper sale

A U.S. District judge leaned against awarding a temporary restraining order that would have halted a blockbuster Bay Area media transaction.

Judge Susan Illston did not offer a final opinion — expected today — but indicated that the plaintiff, Clint Reilly, an investor and former mayoral candidate, had his work cut out for him if he wanted to stop a deal in which Denver-based MediaNews Group would get the Contra Costa Times, San Jose Mercury News, Monterey County Herald and St. Paul (Minn.) Pioneer Press.

In 2000, Reilly’s lawsuit delayed Hearst’s purchase of the Chronicle for months.

“I do not see that the balance of hardship tips sharply in the plaintiff’s favor,” Illston said.

Illston was concerned, however, about the potential ramifications of the sale going through only to have a later court finding in favor of Reilly that would “undo” the deal.

Reilly is suing because Hearst Corp. is helping finance the deal that would leave William Dean Singleton’s MediaNews, which owns 22 newspapers in Northern California, in control of the vast majority of Bay Area dailies. The deal, he contends, violates antitrust laws, stymies competition and threatens the integrity of Bay Area news coverage.

After Sacramento’s McClatchy Co. bought Knight Ridder Inc. for $4.3 billion — making it the second largest newspaper company in the country — it turned around and agreed to a $1 billion deal with MediaNews.

As part of the deal, the Hearst would buy the Monterey County Herald and St. Paul Pioneer Press and trade them to MediaNews for equity in its newspapers outside of California. MediaNews would take over the Contra Costa Times and San Jose Mercury News outright.

If the deal went through, the three Bay Area papers would be one part of the California Newspaper Partnership — a group MediaNews controls that would include Hearst, Gannett Co. and Stephens Media Group.

Reilly’s attorney, Joseph Alioto, asked for the temporary restraining order so Reilly could present evidence that putting control of Bay Area newspapers into the hands of a few would be damaging to the public and industry.

“It’s very unusual for a competitor to finance a competitor in the same market,” Alioto said. “The threat is here, in front of all of us. … The injury need not have to be.”

Arguing against any conspiracy to monopolize Bay Area media, Alan Marx, MediaNews’s attorney, said his client and Hearst were “well aware” the newspapers in the Bay Area should be kept separate, explaining the interest Hearst would gain in non-Bay Area newspapers owned by MediaNews if the deal were to go through.

“Mr. Alioto is asking the court to take it on faith alone — that there’s a conspiracy here,” Marx said.

dsmith@examiner.comBay Area NewsLocal

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