Media Company Keeps It In The Family - Orange County Register Retains Libertarian Voice

NBC4 - TV - Los Angeles ^ | October 14, 2003 | AP

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Freedom Communications Inc., one of the nation's last family owned media companies, has agreed to a partnership with two private equity firms that will keep control of the company in family hands.

The agreement satisfies the concerns of some family members who had sought to sell their shares of the privately held company, which operates The Orange County Register, 27 other daily newspapers, 37 weeklies and eight television stations.

Other major media companies had offered bids for the company, including Gannett Co. Inc., publisher of USA Today, and Denver-based Media News Group Inc., which last week teamed up to offer $1.83 billion in cash for Freedom.

Instead, Freedom's board decided to enter a partnership with Blackstone Communications Partners and Providence Equity Partners. The New York-based investment firms will buy out disgruntled shareholders but agreed to allow remaining family members to operate the company.

"I believe the flexibility provided by the new investment of Blackstone and Providence gives all shareholders the choices they have been seeking," Tim Hoiles, a Freedom director, said in a statement issued by the company.

Hoiles is one of the family shareholders who has advocated a sale or buyout.

Financial terms of the deal were not disclosed. In addition to cash provided by the equity firms, the company said it will borrow money.

Other bids would have resulted in a sale of all or part of Freedom if a majority of shareholders approved. Blackstone and Providence have agreed not to acquire more than 60 percent of Freedom and to accept non-voting stock if more than half of shareholders agree to sell, according to people familiar with the terms of the agreement.

That would mean decisions involving the future of the company could not be made solely by Blackstone and Providence, although both companies will be well-represented on Freedom's board, which now has 12 members.

A group of family members representing 40 percent of the voting stock had said for months that they did not want to sell the company. They preferred a recapitalization plan that would buy out other shareholders while leaving Freedom in family hands.

That group, led by Thomas Bassett, worked out Tuesday's deal with Providence and Blackstone.

"From the very beginning of this process, our guiding principles have been to maximize individual choice for all of Freedom's shareholders, as well as to ensure that the company's unique philosophical heritage was protected," Bassett said. "We believe that by partnering with Blackstone and Providence we will not only satisfy these goals, but also produce a stronger company going forward."

If approved, the deal would resolve a long-running feud that pitted several generations of descendants of company founder R.C. Hoiles against each other. Older family members have complained about the company's performance for years and had sought either a buyout of their shares or an outright sale of the company.

"The goal from the beginning has always been fairness to everyone's objectives, no simple task in a multigenerational family not shy to express its views," Alan Bell, Freedom's president and chief executive officer, said in a statement.

Freedom's board voted to explore a sale or merger in March and assembled a committee of non-family board members to solicit bids and fix a value on the company. It was believed to be worth $1.5 billion to $2 billion.

Other companies that submitted bids included Lee Enterprises Inc., the Journal Register Co. and E.W. Scripps.

Dean Singleton, vice chairman and chief executive officer of Media News Group, said he was disappointed in Freedom's decision, saying he believes the board never intended to allow the company to leave family hands.

"The result was predetermined before the process ever began," Singleton said.

He said he suspects some family members will be surprised when they compare the price offered by Blackstone and Providence with the $235 per share offered by Media News and Gannett.

"It is clear the auction was a fake auction, that they wasted the time of the companies that participated," Singleton said.

Gannett would not comment about Freedom's announcement, company spokeswoman Tara Connell said.

Providence and Blackstone are private equity investment firms that have a history of striking partnerships with family owned businesses and media companies.

Family members who had sought to retain control said it was important for Freedom properties to retain their libertarian voice.

"I think the Register is a very good paper and a very strong paper, and it's in the interest of Orange County to keep it that way," said Michael Parks, director of the School of Journalism at the University of Southern California's Annenberg School for Communication. "I would really regret the loss of a local ownership."

How long Freedom will remain in family hands is unclear. Equity firms often invest in struggling companies, then sell them in a few years when they become more profitable.

"These companies are interested in flipping the property," said John Morton, president of media consulting firm Morton Research Inc. "Usually when an investment company buys into a media company, ultimately they hope to sell the property at a profit."

R.C. Hoiles bought the Santa Ana Register in 1935 and built it into a privately owned media company. He used the newspaper to promulgate his libertarian political philosophy in Orange County, a stronghold of conservatism.

The Orange County Register has grown to a circulation of 315,000, has won three Pulitzer Prizes and successfully battles the Los Angeles Times for circulation on its suburban home turf. The paper is flagship of a group that includes The Gazette in Colorado Springs, Colo., and the Tribune papers in suburban Phoenix.

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Some shareholders believed the company has been run poorly, draining their equity. They wanted out, but how do you value the shares and come up with the cash?

Shareholders are biting the bullet to keep family control. The new partners will take a large piece of the pie, reducing dividends.

It doesn't seem like a big deal but, while news content will stay mainstream, an alternative editorial voice is preserved in America.

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[Dog Gone]

Thank God they didn't sell out to the LA Slimes.

[Parley Baer]

In my opinion they are only one step above the LA Times. They features many articles from the NY Times and the Boston Globe. They think Ariana Huffington has a great political future in California. Maybe a Senator.(barf) It is the editorial page that half way saves the newspaper. It is indeed Libertarian. I'am a 25 year subscriber. Parley

[Dog Gone]

I moved from southern California about 25 years ago, and it was still a pretty good newspaper then, although much thinner than the LA Times. We still occasionally see articles posted from there here at this forum, and I assumed they were holding the faith.

Apparently not. Maybe it was the influence of the family members who sold out.

I like to remain optimistic.