Freedom News Service
IRVINE, Calif. — Freedom Communications Inc., whose fractious family owners have been bitterly divided over how to let some of their shareholders cash out, said Tuesday its board of directors has endorsed a plan that will leave intact the libertarian legacy of company founder and patriarch Raymond C. Hoiles.
Irvine, California-based Freedom, parent of the Quay County Sun, had been wooed by such media giants as USA Today publisher Gannett Co. Inc. and Denver-based MediaNews Group, owner of the Denver Post and the Los Angeles Daily News.
Instead, Freedom’s board struck an agreement late Monday with two East Coast investment firms, Blackstone Communications Partners and Providence Equity Partners, which would buy up the shares of those family members who want out. The deal, which values Freedom at slightly more than $2 billion, would give Blackstone and Providence a large but non-controlling stake in Freedom.
The agreement, which will be submitted to shareholders for their approval later this year, confounds the expectations of some in the media industry who thought Freedom was likely to be sold outright in the face of seemingly unreconcilable differences among family factions.
“I would say it is out of the ordinary,” said Kevin Lavalla, managing director of Jordan, Edmiston Group Inc., a newspaper deal broker. “Usually when something like this happens, another company buys it.”
Indeed, Freedom’s board turned down a last-minute joint bid by MediaNews and Gannett that, at least on paper, valued Freedom at nearly $120 million more than the winning offer.
Alan Bell, Freedom’s chief executive officer, said price was only one of many considerations. The board, he said, had to choose the plan that would be “of the most benefit to shareholders” and the most likely to get done.
At least 40 percent of Freedom’s owners wanted to keep their company in family hands — a big disadvantage for the Gannett-Singleton bid. In the end, Bell said, the board decided the Blackstone-Providence proposal was the one most likely to be consummated.
Gannett spokeswoman Tara Connell declined to comment Tuesday. Officials at MediaNews did not return phone calls.
The decision by Freedom’s board could mark the resolution of a generation-old dispute over the family-controlled company’s direction that simmered under the surface for years but boiled over into public view last summer.
That’s when a group of restive shareholders, divided on many issues but frustrated with the company’s poor performance (including the reported loss of more than $100 million in failed Internet and magazine projects), demanded to be bought out at a fair price. Tim Hoiles, a grandson of the founder and the most vocal of the dissidents, called Freedom’s performance “dismal” and said selling Freedom outright was the way to get the highest price.
After months of wrangling, shareholders decided to explore an option that had been considered unthinkable: putting the whole company up for sale and ending nearly seven decades of Hoiles family ownership.
Members of the Hoiles family’s fourth generation, backed by some of their elders, partnered early on with Blackstone and Providence in an effort to keep the company from being sold.
Tim Hoiles and his cousin David Hardie were skeptical of the plan, saying an outright sale or merger with a larger media company would be a better bet. But when the bids came in late last month, Blackstone and Providence offered more than many had expected, and both Hoiles and Hardie dropped their objections.
“I liken this to the end of the Civil War and a kind of an armistice day,” Bell said.