Freedom Newspapers Spurns Takeover Offer

Directors of Freedom Newspapers voted Thursday to reject a $902-million takeover offer from a disaffected member of the newspaper and broadcasting company’s founding family.

Chairman Robert C. Hardie said that a majority of the company’s shareholders “are not interested in selling to anyone.” The firm’s flagship newspaper is the 270,000-circulation Orange County Register.

The previously undisclosed offer, made Aug. 9 by Harry H. Hoiles, the only surviving son of Freedom Newspapers’ founder, Raymond Cyrus Hoiles, was rejected by a 9-4 vote of directors at a special meeting held at the company’s Santa Ana headquarters.

Earnings Not Disclosed

For financial and philosophical reasons, Harry Hoiles has been trying to gain control of Freedom Newspapers for more than two years, and in 1982 he filed a lawsuit to take control from the other shareholders--almost all of them members of his family. That suit is still pending.

Because it is closely held, Freedom Newspapers does not disclose its financial results publicly but is considered by industry analysts to be among the most profitable publishing chains in the country. In addition to the Register, it owns 28 daily newspapers, three weeklies and four television stations in a dozen states. The combined daily circulation of Freedom’s newspapers exceeds 850,000.

All of its newspapers have espoused the libertarian philosophy, which holds that there should be no taxation and that the government should not interfere with the individual’s private life or with business. But Harry Hoiles has claimed on several occasions that other family members have watered down the papers’ support of that philosophy.

Hardie said Hoiles’ bid had been keep secret until Thursday by mutual agreement. The results of Thursday’s meeting were announced by Hoiles’ investment banker, the New York firm of Henry Ansbacher Inc. and the Los Angeles office of Drexel Burnham Lambert.

Hardie said the vote, which was based on results of a non-binding advisory ballot mailed to Freedom’s 80 individual shareholders, showed that “we are not interested in selling. We are not looking for a better price. We all have an affection for the company, we enjoy the newspaper business and we have a legacy we are proud of, and we wish to preserve it and to carry forward.”

Members of Family

The 68-year-old Hoiles, his wife and three children together own about 33% of the 9.4 million shares of Freedom stock. The other major shareholders are the family of Harry’s sister, Mary Jane Hoiles Hardie, which collectively owns a third of the company, and the heirs of Clarence Hoiles, Harry’s late brother, owners of the remaining 33%. Mary Jane Hoiles Hardie is married to the present company chairman.

The rejected offer called for Hoiles to transfer his shares of Freedom to a newly formed corporation, Independence News Corp., and for Independence to purchase the remaining stock for $96 per share.

The purchase was to have been financed with borrowings against Freedom’s cash flow, according to Peter Kent, an investment banker with Henry Ansbacher. Kent said Independence is wholly owned by Hoiles and his immediate family.

The investment banker said Hoiles’ alternatives now are to continue pressing his lawsuit or to “make another offer, attempt to generate an outside offer for the company or to sell Harry’s shares in the outside market.”

Hoiles could not be reached for comment, but, in a statement released Thursday afternoon, a spokesman said that Hoiles “expressed doubt as to whether all shareholders fully appreciated the benefits this offer and the alternative participations proposed.”

Price Above Average

John Morton, a newspaper analyst with Lynch, Jones & Ryan in New York, said Hoiles’ offer represented an “above-average” price for a publishing and broadcasting chain, reflecting the profitability of the company.

Morton is knowledgeable about Freedom Newspapers because he was retained by the Hardie family and the Clarence Hoiles heirs to appear as an expert witness on their behalf if Harry Hoiles’ suit should come to trial. “I suspect this offer grew out of Mr. Hoiles’ position in the family,” Morton said. “This is one of his responses to his dissatisfaction there.”

Hoiles’ suit, which seeks to force involuntary liquidation of the company, is scheduled to begin trial in Orange County Superior Court early next year.

Although financial considerations are at the root of the family fight, the libertarian philosophy advocated by R. C. Hoiles and, to greater or lesser degrees by the surviving members of his family, also is a large factor in the dispute.

Hoiles began to talk about splitting up the assets of the company five years ago after he reached an impasse with his brother and sister over who should run the operation.

R. C. Hoiles, who founded the company in 1927, died in 1970, and Clarence, his oldest son, then ran the company until his health began to fail in 1975.

Named to Committee

Harry Hoiles became president of Freedom Newspapers thereafter, but he was replaced as president in 1978 when the other family members elected D. R. Segal to the post. Segal, a longtime Freedom executive, was the first non-family member to head the company. He still serves as president.

Harry Hoiles subsequently was named to a three-member executive committee on Freedom’s board but was ousted by the other family factions in 1982, according to his attorney, Richard Quan.

In April, 1982, four months after Clarence Hoiles died, Harry Hoiles sued to dissolve the corporation. He claimed that his brother’s and sister’s families violated their fiduciary duties and put pressure on him to sell at a low price by forcing him off the executive committee and by curtailing stock sales to outsiders, which he claims artificially depressed the value of his stock.

At one point in 1981 and again on March 30, 1982, according to the suit, the Hoiles families tried to buy out Harry Hoiles’ interest with offers that amounted to 9% of his shares’ fair market value.

Times staff writers Heidi Evans and James S. Granelli also contributed to this story.