Judge Refuses to Halt Sale of S.F. Chronicle

A federal judge refused Thursday to block sale of the San Francisco Chronicle to rival Hearst Corp., ending a century of often combative journalistic jousting between the two newspaper giants.

U.S. District Judge Vaughn Walker rejected a claim by real estate millionaire Clint Reilly that the $660-million deal would threaten newspaper competition in the city.

The judge’s ruling also cleared the way for Hearst to hand off its flagship San Francisco Examiner to publisher Ted Fang, owner of a thrice-weekly free paper.

“People here are relieved this phase is over, that there’s finally a decision,” said Examiner Executive Editor Phil Bronstein. “But people here still have to put out a paper. This is just yet another story to write.”

Reilly, a former candidate for San Francisco mayor who lost his own bid to purchase the Examiner, could not be reached for comment.

Thursday’s decision ends a high-profile antitrust trial that roiled the political waters here and included front page revelations about the way government and the media are sometimes intertwined.

During the May trial, Tim White, the Examiner’s publisher, testified that he offered to trade favorable editorial treatment for Mayor Willie Brown’s support of the newspaper deal. Hearst executives denied any deal with Brown took place and put White on leave.

Last August, Hearst announced plans to purchase the Chronicle, the second-largest newspaper in California with a daily circulation of more than 450,000. Officials said they would sell or close the struggling Examiner, among the largest remaining afternoon papers, after 120 years of Hearst ownership.

After months of civic pressure to keep the Examiner alive, Hearst agreed to pay Fang, publisher of the Independent newspaper and Asian Week, a $66-million subsidy over three years if he assumed ownership.

The morning Chronicle has always viewed itself as the more serious regional newspaper while the combative Examiner, with a daily circulation of about 100,000, has focused on San Francisco.

The Chronicle sale alarmed the city’s various minority communities, which feared diminished coverage. But Orville Schell, dean of the graduate school of journalism at UC Berkeley, dismissed those concerns, saying the sale allowed Hearst to create a great newspaper in one of the nation’s premier news towns.

“I think there’s a rather extraordinary opportunity here,” he said. “San Francisco is a great city enjoying a huge economic boom with a very sophisticated readership. All the stars are potentially aligned.”

He said the sale did not signal the end of fierce newspaper competition in San Francisco. “The San Jose Mercury-News just started a San Francisco edition. This area has a lot of contenders, never mind the dot.coms.”

Bronstein echoed those comments, saying the existing joint operating agreement between the two dailies--which kept the Examiner afloat--was “not conducive to putting out great newspapers.”

“With that removed and the talent that exists here, this could be the last great newspaper crusade,” he said.

As part of the sale, Hearst plans to merge the staffs of both papers at an expanded Chronicle.

While giving the green light to the deal, Walker criticized the U.S. Department of Justice, which approved the purchase. He said the department’s conduct “seemed like political favoritism masquerading as law enforcement.” The judge also raised concerns about Fang’s ability to run a viable competitor to the Chronicle and characterized the Fang transaction as “not a sale, but a heavily subsidized transfer.”

Fang did not return calls for comment Thursday.

Examiner staffers questioned the future of a Fang-owned paper.

“Most of us would just as soon see the Examiner fade into history instead of being taken over by those guys and run into the ground,” said Lance Williams, an investigative reporter.

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Times staff writer Joseph Menn contributed to this report.