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UPDATE 1-Hearst pays $317 million for MediaNews stake

Mon Oct 22, 2007 6:12pm EDT

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(Adds details on newspaper and stake swap)

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NEW YORK, Oct 22 (Reuters) - MediaNews Group Inc said on Monday that Hearst Corp bought a stake in the company for $317 million as part of a complex deal between the two privately held publishers involving several San Francisco-area papers.

Under the terms of the deal, first announced last year and completed last Friday, MediaNews picked up papers that Hearst bought from McClatchy Co (MNI.N) in exchange for giving Hearst a 31 percent interest in MediaNews's operations outside the San Francisco region.

MediaNews disclosed the stake in a filing with U.S. securities regulators on Monday.

Hearst owns the San Francisco Chronicle, while MediaNews owns surrounding daily papers, such as the San Jose Mercury News, the Contra Costa Times, the Oakland Tribune and other papers in the Alameda Newspaper Group.

The deal, which came about after McClatchy bought former Mercury News and Times publisher Knight Ridder, sews up ownership of nearly all the daily papers under two owners.

This resulted in a lawsuit by San Francisco real estate developer Clinton Reilly, who argued it would hurt newspaper competition in the region. Hearst and MediaNews settled the lawsuit in April after a U.S. federal court judge said she would not dismiss his effort to sue.

McClatchy sold the Mercury News and Contra Costa Times to the Denver-based MediaNews. It sold the Monterey County Herald and the St. Paul Pioneer Press in Minnesota to Hearst, which then passed them to MediaNews in exchange for the stake.

The papers were previously owned by Knight Ridder before McClatchy bought that publisher last year.

MediaNews also agreed to take over the Torrance Daily Breeze in California from Hearst. (Reporting by Robert MacMillan)

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