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Sources: SJ Mercury sold to MediaNews

Palo Alto Daily News group also likely part of deal

MediaNews Group Inc. has emerged as the buyer for the San Jose Mercury News, Contra Costa Times and Monterey County Herald, according to sources within Knight Ridder.

An official announcement is expected to come this afternoon.

The Palo Alto Daily News group and its four sister papers, a Bay Area chain of local tabloids that Knight Ridder purchased a year ago, are expected to be a part of the package deal.

The Los Angeles Times reported last week that MediaNews, a privately held Denver-based company, was putting together a $1 billion bid for the three major Bay Area newspapers, and one in Minnesota, from McClatchy Co. The Times also reported that MediaNews was likely partnering with Gannett Inc. and Stephens Media Group for the deal.

Prior to the sale, MediaNews already owned the San Mateo County Times, the Oakland Tribune and 18 other Northern California papers. Across the Bay Area, MediaNews will now reportedly have a daily circulation of more than 800,000. Only the San Francisco Chronicle, with a daily circulation of approximately 400,000, will even come close to rivaling MediaNews for Bay Area newspaper dominance. Other MediaNews papers include the Fremont Argus, Hayward Daily Review, Tri-Valley Herald and Marin Independent Journal.

The expected announcement apparently ends an unsuccessful bid from Mercury News employees to "save" the paper. They were working with grocery store magnate Ronald Burkle and had hoped his company, Yucaipa Companies LLC, would purchase all 12 papers. The employees had set up a Web site, www.savethemerc.com, to rally community support.

At 12:30 p.m., MediaNews President Jody Lodovic would neither confirm nor deny reports of a sale. "It sounds like more rumors to me," Lodovic said.

Among media critics, MediaNews CEO Dean Singleton has a mediocre reputation. Prior to the sale, they predicted that the Mercury News would face layoffs and a continued thinning of its news coverage if MediaNews purchased it. Singleton's critics received new ammunition last week when the Denver Post, MediaNews' flagship paper, announced it was cutting 25 positions.

The Mercury News has suffered financially in recent years as the Silicon Valley economy lagged and online classified sites like Craigslist took away advertising revenue.

Knight Ridder, amidst pressure from shareholders, announced in March it was selling its 32 newspapers to the McClatchy Company for $4.5 billion. McClatchy immediately announced it would sell off 12 of the papers, including those in the Bay Area, to help finance the deal.

Last week, California Attorney General Bill Lockyer announced he was examining the sale "to determine whether any reduction of competition in those markets would be significant enough to warrant intervention," according to a statement.

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