Lobel’s view carried the day.
“I probably would not have made the same call (as the creditors),” said lawyer David Robinson of Enterprise Counsel Group in Irvine, who worked with Doti. “I would have brought the (Doti) deal before the bankruptcy court. But I can’t say their decision was improper—it does fall within the zone of business judgment.”
There was a surprise at the March 30 closing: Digital First’s purchase price was reduced by $2 million, to just under $50 million, because of Digital’s concern over “newly discovered facts.” The facts were not described in court, but persons familiar with the case said they were circulation-related.
Some involved in Doti’s effort questioned why this change didn’t “open the door” to considering their offer. But Lobel said Digital First raised the issue before Doti’s group had coalesced. Sources said Digital wanted an $8.6 million reduction, that the creditors countered with $2 million and that Digital accepted.
Doti said he decided to pursue Freedom after reading the March 21 news that Tribune was out of the bidding and that federal bankruptcy Judge Mark Wallace had OK’d Freedom’s sale for $52 million to Digital First, the only other bidder. (A third group, headed by Freedom executives and local developer Michael Harrah, had dropped out days earlier.)
Doti sprang into action with the intensity that helped him grow modest Chapman College into booming Chapman University. He raised the $56 million in less than a week, and was close to lining up another $20 million in working capital. Doti said he pledged a small share; he declined to name the other investors, but said the largest put up $10 million.
Doti said his group would have run Freedom to make a profit and could not have guaranteed job security to all of its employees. (Digital First cut 70 non-editorial jobs upon taking over).
But Lobel said he sensed the Doti group was motivated by civic pride and the prestige of owning the hometown paper: “It was not a business investment opportunity for their people as much as it was, in part, doing something for the community.”
Doti said he and a couple of the other investors would have served as directors of Freedom, but his participation would have been limited and would not have interfered with his teaching and other ongoing duties at Chapman.
Doti said his investors had no qualms about matching the Tribune offer even with the problems besetting the newspaper industry and Freedom’s particular woes—it has gone bankrupt twice in six years. He said they were confident Tribune had thoroughly vetted its longtime competitor Freedom and attached a reasonable price to it.