Battle lines have been drawn in the boardroom of Irvine-based Freedom Communi-cations Inc. over who should be the next chief executive of the parent company of the Orange County Register.
Freedom’s directors are said to be split on who they support,members of the Hoiles family, who control about half of the board’s voting power, and the company’s private equity investors are backing different candidates, ac-cording to sources.
A few independent di-rectors still are deciding.
The board faces a decision on a new chief executive because current boss Scott Flanders said early this month that he’s leaving to take the top spot at Chicago’s Playboy Enterprises Inc.
Flanders leaves June 30.
The board is down to two choices, according to sources familiar with the deliberations.
They include former newspaper publisher Burl Osborne, an independent director on Freedom’s board, and Alan Bell, who served as chief executive from 2002 to 2006.
Directors are said to be deadlocked with the family supporting Bell and the private equity firms and Flanders backing Osborne.
The impasse has stalled the naming of a chief executive, which first was expected around June 5.
A pair of independent directors on vacation holds the deciding votes, sources said.
Besides Osborne, Freedom’s independent directors are William Baker, James Spanfeller and Chris Philibbosian. It’s unclear which two were on vacation last week.
Osborne was publisher of The Dallas Morning News from 1986 to 2001. He also is chairman of the Belo Foundation, an endowment created by newspaper company Belo Corp.
He seems to be the frontrunner, according to sources close to the board. His experience with newspapers suggests some directors see Freedom’s struggling Orange County Register and other newspapers as the top priority for the next chief executive.
Freedom, which has yearly revenue of more than $600 million, also owns and runs TV stations and magazines.
The Hoiles family seems to have placed much of its faith behind Bell, who ran the company before Flanders.
Bell’s Background
Bell joined Freedom in 1989 and served as president of Freedom’s broadcasting division, responsible for the company’s eight network affiliates. He was promoted to chief executive in 2002.
He stepped aside for Flanders in 2004.
Director Spanfeller, who’s chief executive at Forbes.com, also has been suggested as a chief executive candidate.
Sources close to the board said Spanfeller wasn’t being considered, despite his print and interactive background.
Whoever gets the job faces tough negotiations to restructure the company’s $700 million debt next year.
Flanders spent the past year or so working with Freedom’s creditors as its financial results fell below terms initially agreed to with lenders.
In April, a group of lenders extended until Dec. 31 a deadline for the company to meet credit terms it technically defaulted on in September.
At the time, Freedom went into technical default on terms agreed to with lenders last fall after its declining 12-month profits put its debt at more than five times profits.
As part of the waiver, the company prepaid some principal payments due this year as well as an amendment fee.
There has been talk about Freedom considering bankruptcy, among other options.
“It is possible, but unlikely,” Flanders told the Business Journal in March.
Flanders long has been the lynchpin between the board’s two factions.
He was a Freedom director when the company was sold for $2 billion to New York-based Blackstone Group LP and Rhode Island’s Providence Equity Partners LLC in 2004.
The private equity firms’ voting power is capped at 49.9% under the terms of the sale.
The investors were expected to cash out this year. That’s now off the table amid the newspaper slump and a lower valuation for Freedom.
Seamless Transition?
The board is hoping for a seamless transition once a choice is made, a source close to Freedom said.
Flanders took the top job at Playboy
after weeks of speculation about a possible move.
The announcement came following a six-month search after former chief executive Christie Hefner, daughter of the magazine’s founder, Hugh Hefner, stepped down in December.
Flanders was tapped to lead a turnaround of the struggling adult media company, possibly sparking an eventual sale.
“I came to Playboy to build long-term shareholder value,” Flanders said in a release. “Having said that, a brand as iconic and global as Playboy will always command a lot of interest among different parties.”
Flanders negotiated the sale of Columbia House Co. by Blackstone Group in 2002.
