Family Eyes Options for Register’s Parent
The family that owns Freedom Communications Inc., parent company of the Orange County Register, will meet this weekend to discuss ways that disaffected shareholders can cash out their holdings, including a possible initial public stock offering or partial sale of the business.
Under pressure from dissident shareholder Tim Hoiles, grandson of company founder Raymond Cyrus Hoiles and an 8.6% owner who is pushing for the company’s sale, about 50 members of the conservative Hoiles family plan to examine 12 options for raising money and hope to have winnowed the list to three or four by Sunday.
The list will be forwarded to the board, which meets Tuesday. The board is not expected to take immediate action.
“This is a company that’s been around for nearly 80 years, and I expect the shareholders will take the necessary time to reach an informed decision about something so important,” said Samuel C. Wolgemuth, chief executive of Irvine-based Freedom.
But all is not harmonious. Hoiles and other family members, unhappy with Freedom’s financial performance in recent years, want to liquidate some or all of their shares to diversify their holdings. Much of the old guard appears to favor a go-slow approach. Insiders predict that sparks could fly at the session this weekend at the Costa Mesa Marriott Suites. The meeting is closed to the public.
Even before the special session begins, Hoiles, 50, said his proposal to sell the company would not receive fair consideration because of opposition from management and some board members. Hoiles claims to have the support of 40% to 60% of shareholders.
Hoiles said he blames bad business decisions by Freedom executives for a decline in the company’s performance.
“Look, the present management has lost me about 25% of my equity in the past five to seven years,” Hoiles said. “They got into magazine and Internet ventures that Freedom had no business getting into.”
Hoiles is no stranger to family spats. His father, Harry Hoiles, waged an unsuccessful battle in the 1980s to break up Freedom.
The company, which owns 28 daily newspapers, 37 weeklies and eight television stations, last year had revenue of $760 million and lost about $94 million amid the nationwide advertising downturn and softening economy, said sources familiar with the results. The business also reportedly wrote off $103 million for magazine, Internet and other losses.
The Register, the crown jewel of the Hoileses’ holdings, is a standard-bearer of libertarianism and the dominant newspaper in one of the country’s most politically conservative counties.
Shareholder Robin Hardie said, “Although there’s an acceptance of the need to change, many of us want the company to remain private and don’t want to sell it.”
John Morton, a newspaper analyst based in Maryland, said he would be surprised if the Hoileses sold Freedom, which he believes could fetch $1.5 billion to $2 billion.
“Owning a newspaper is different than owning a green bean cannery,” he said. “There’s a real emotional attachment to it.”
Morton said the family might try to buy out Tim Hoiles or spin off part of the company. Whatever it chooses, the Hoileses probably will remain majority owners, he said.
Earlier this year, Tim Hoiles said he negotiated with shareholders to buy him out, at one point for as much as $92 million. No agreement was reached.
If Freedom were put on the block, it probably would attract interest from such potential buyers as Gannett Co., Knight Ridder Inc. and Tribune Co., owner of the Los Angeles Times, analysts said.
Even if the Hoileses were so inclined, now might not be a good time to sell, Edward Jones analyst Jake Balzer said. With many businesses scaling back their acquisitions, Freedom probably would fetch less than it would have just 18 months ago, he said.
Taking the company public might even be a less palatable option, said Tom Madden, a partner at online research firm IPO Monitor. In the first seven months of this year, 56 IPOs raised a total of $13.6 billion. In the same period two years ago, 342 IPOs took in $78.7 billion.
“Last year was an anemic market for IPOs,” he said. “This year it’s almost dead.”
At the Register, the staff is closely monitoring events, said a staff writer who requested anonymity. Employees recently peppered Wolgemuth with questions at a staff meeting, asking him about the likelihood of a sale.
“This isn’t affecting peoples’ work, but it’s definitely on their minds,” the writer said. “Reporters are keeping their ears open.”
