Hearst Corp. will pay Transcontinental Inc. a one-time $200 million fee as a result of renegotiating the 15-year contract governing the printer’s production of the San Francisco Chronicle.
Transcontinental said the fee is part of an agreement in principle struck between the two companies. In return, Transcontinental is cutting by $30 million the annual bill it will charge Hearst to produce and package the Chronicle at its Fremont, Calif., plant. The renegotiated contract would be effective Jan. 1.
Transcontinental will continue to print the Chronicle over the term of the agreement, slated to expire in 2024, and will maintain ownership of the plant and equipment.
Transcontinental opened the $230 million Fremont plant in 2009 after signing a $1 billion contract with Hearst. The highly automated facility is anchored by three triplewide manroland Colorman XXL presses engineered for both heatset and coldset production.
As print circulation for the Chronicle continues to decline — the paper now has an average daily print circulation of 156,500 compared to 251,782 in 2009 — Transcontinental and Hearst agreed to alter the contract. The printer said it will now only need two of the three high-speed presses to produce the Chronicle.
Transcontinental said it will not suffer any loss in profitability of the facility because it will spread the $200 million across the remaining life of the contract.
It will also take undisclosed steps to reduce its cost base and said it will market the freed-up capacity to attract new customers.
“We are pleased to continue to foster our growing relationship with Hearst Corp., not only in printing, but also in magazine publishing, with our Elle brand partnership in Canada, and in digital solutions with our advertising representation partnership,” said François Olivier, president and CEO of Transcontinental in a statement.