UPPING THE ANTE
Dissident Holding Out for ‘Fair Price’ for Register Parent Shares
By RICK REIFF
Fourteen months ago, dissident shareholder Tim Hoiles said he offered to sell his 8.6% stake in Irvine-based Freedom Communications Inc., holding company of the Orange County Register, for $135 a share, or $90 million.
The board refused.
Now, Hoiles says, he won’t sell even for $200 a share, or $134 million,the reported price being offered by a family faction that is bidding to retain control of Freedom.
The faction is headed by David Threshie and Dick Wallace,Hoiles’ fellow Freedom directors and relatives by marriage,with backing from investment banks Blackstone Group LP and Providence Equity Partners Inc.
What would Hoiles sell for? “Whatever the fair price is,” he responded.
“Those people who stay in the business should have to pay the market rate to maintain assets they feel that they know how to run,” he said. “Every $10 a share is more than a $5 million difference to me. I’ve already given at the office,I’ve already lost $30 million bucks because of their management.”
Speculation is that with about a dozen media companies and investment banks jockeying for all or parts of Freedom, the highest bids will be considerably more than the family offer, possibly approaching or surpassing $250 a share, or $2 billion for the whole company.
Freedom, in addition to the flagship Register, owns 27 dailies, 37 weekly papers and eight TV stations.
The fractious Freedom family, heirs of founder R.C. Hoiles, is divided over the future of the company.
If a majority of shareholders decide not to sell the company or opt for an offer unacceptable to Tim Hoiles and other would-be sellers, a court battle could ensue.
Tim Hoiles has retained flamboyant San Francisco lawyer Joseph M. Alioto and threatened an antitrust lawsuit.
A majority of shareholders sided with Tim Hoiles against Threshie in soliciting bids for the company. But some of those shareholders also have expressed sympathy for the Threshie-Blackstone bid, dubbed the “fourth generation” plan be-cause it involves younger heirs buying out their elders in order to preserve Freedom’s libertarian creed.
Financial publication Daily Deal, citing unnamed sources, reported last week that the fourth generation plan was already believed to be backed by holders of 40% of Freedom’s shares.
Roughly the same percentage has been said to back Tim Hoiles’ call for a sale. Tim Hoiles said last week it is impossible to predict how swing shareholders will react until the offers are analyzed.
David Hardie, another director and shareholder who backs a sale, dismissed support for the fourth generation plan.
“They have an objective to sell their deal,” he said. “All of their comments need to be taken in that light.”
The bidding process, being managed by Morgan Stanley and Evercore Partners, and overseen by Freedom’s outside directors, enters a critical stage in the next two weeks.
Bidders, winnowed from an original field of 26 last month, are set to meet with family directors in Newport Beach this week and with all shareholders in Dallas next week. Final bids are due shortly after Labor Day.
The outside directors and Freedom Chief Executive Alan Bell have kept a tight lid on details. But that hasn’t stopped names from surfacing.
The two most frequently mentioned: Gannett Co., which already has declared its interest in buying Freedom, and William Dean Singleton’s MediaNews Group Inc.
Singleton is said to have submitted multiple bids, including at least one jointly with Media General Inc. Other rumored bidders include Hearst Corp., E.W. Scripps Co., Pulitzer Inc., Lee Enterprises Inc. and Chicago private equity investor Madison Dearborn Partners.
McClatchy Co. said it is not bidding for Freedom. Other major media companies rumored to be out of the running or not bidding include the Los Angeles Times’ parent Tribune Co., Knight Ridder Inc., Washington Post Co., New York Times Co. and Belo Corp.
Tim Hoiles, in a phone call from Ireland where he was vacationing before returning for this week’s meetings, praised the outside directors. But he also took shots at the Threshie offer.
Only one member of the family’s fourth generation, David Threshie Jr., a marketing executive with the Mesa Tribune, works for Freedom, he said.
“They love to say it’s a family business. If this is a family business, we’d have a bunch of fourth generation involved. We have one,” Hoiles said.
He added, “Threshie and Wallace don’t own stock. Their wives do.”
Sisters Judy Hoiles Threshie,David Threshie’s wife,and Pat Hoiles Wallace, Wallace’s wife, are granddaughters of Freedom’s founder and cousins to Tim Hoiles.
David Threshie, Freedom’s chairman and retired publisher of the Register, did not return a call seeking comment.
