Freedom Buys Out Disgruntled Shareholders

By: Gary Gentile, AP Business Writer (AP) Freedom Communications Inc. closed a recapitalization deal Tuesday that allows it to buy out disgruntled shareholders while keeping operational control in the hands of the founding Hoiles family.

One of the nation's last family-owned media companies, Irvine, Calif.-based Freedom owns The Orange County Register, 27 other daily newspapers, 37 weeklies and eight television stations. It is 60% owned by family members, with the other 40% held by Blackstone Communications Partners and Providence Equity Partners.

The deal ends years of family squabbling. Some third-generation family members had been unhappy with the value of their investment and frustrated by the inability to sell shares of the privately held company.

Younger family members have been seeking a way to raise cash and considered an outright sale of all or part of the company before deciding on the private equity partnership last fall.

"It's kind of miraculous when you have a feuding family and a wonderful set of assets like this," said Freedom President and chief executive Alan J. Bell. "The standard outcome is they blow up and get sold. Here it gets saved. This is the deal that defied all expectations."

Family members who cashed out received about $212.71 per share, according to sources familiar with the terms of the deal. It is not known exactly how many family members opted to tender their shares, but Bell said 57.8% of outstanding shares were cashed in.

The deal results in a new, 13-member board. That board includes four family members, four members from the investment companies, four independent directors and Bell.

The deal calls for a family member to serve as non-executive chairman. Thomas W. Bassett will serve as interim chairman until the family shareholders meet in August.

Freedom's board voted to explore a sale or merger in March 2003 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.

Among the bidders were Gannett Co. Inc., publisher of USA Today, and Denver-based MediaNews Group Inc., which teamed up to offer $1.83 billion in cash for Freedom. The deal valued the company at $235 per share.

The family opted instead for a lesser offer that allows the company to maintain its trademark libertarian voice on its editorial pages.

Bell said Freedom has posted double-digit profit gains in the first four months of the year compared to the same period last year.

"Now that you pull away all the noise, the sky's the limit," he said.