Shareholders Vote for Freedom Deal
Scarred by decades of battles over money, power and respect, the family that owns Freedom Communications Inc. on Wednesday finalized a deal that will allow some relatives to divorce themselves financially from the parent of the Orange County Register and pocket millions of dollars as they walk away.
The agreement also gives family members who have been adamant about keeping control of Irvine-based Freedom a chance to do so by bringing in outside investors. The new partners, investment firms Blackstone Group and Providence Equity Partners, raised the money for the financial restructuring -- about $1.1 billion in new bank loans to buy out shares, retire old debt and supply working capital, in addition to providing as much as $580 million in cash equity.
The deal, endorsed by Freedom’s board Oct. 13, won overwhelming approval at a shareholder meeting Wednesday, said Chief Executive Alan J. Bell, describing it as “win-win” for the warring factions. All but five of the 90 family shareholders voted by proxy. The margin of approval wasn’t announced.
“The kind of divisiveness and close combat we’ve seen across the board table is not going to be something you’ll see in the future,” Bell said. He will retain his post and his seat on the board in the restructured company, which owns 65 newspapers and eight television stations.
Those attending the meeting included board member Timothy C. Hoiles, 51, whose father, Harry Hoiles, lost a lawsuit seeking to split up Freedom during the 1980s after being denied a top position in the company.
Tim Hoiles became publisher of a Freedom paper in Pampa, Texas, at age 21 but spent most of his adult life consumed with trying to sell his stake in the private business at an open-market price -- attempts he felt were consistently thwarted by a family branch descended from his uncle, Clarence Hoiles.
Although those efforts finally bore fruit Wednesday, the victory “is bittersweet,” Hoiles said. He is a grandson of Freedom’s founder, Raymond Cyrus “R.C.” Hoiles, a vociferous libertarian who used his newspapers’ editorial pages to tout his views.
“It’s getting out of a company that was founded by my grandfather to make sure the public would think about certain things, many of which I agree with,” Hoiles said.
The process leading to Wednesday’s vote included a seven-month auction that drew bids from prominent buyout firms and media companies such as USA Today publisher Gannett Co. and MediaNews Group Inc.
The auction drove the net price for sellers to $212.71 a share.
Freedom Chairman R. David Threshie and several Hoiles family members who will be on the new board declined to comment, saying the deal still required regulatory approval.
It wasn’t clear how many of Freedom’s 7.8 million shares would be cashed out, and shareholders are free to change their minds until 10 days before the close of the deal, which is expected in March. As of Tuesday, family members had sent in forms indicating that they would sell 48% of all the shares, and Tim Hoiles estimated that cash-outs could run as high as 65%. His cousin David Hardie, another dissident board member, predicted a lower 58%.
Neither amount is enough to give the Blackstone/Providence group a majority of shares in the restructured Freedom, and the family negotiated other protections that -- barring a new split among relatives -- should give it the final say on major decisions for several years. However, the transaction gives the outside investors more power as time passes, including the right to be bought out at an appraised market price after seven years.
Yet, at least two shareholders -- Threshie and Richard Wallace, vice president of corporate affairs -- have made clear that their goal was to buy out the private investment firms as quickly as possible, according to several participants in a shareholder question-and-answer meeting this month. That seeming refusal to entertain other options, such as a public stock offering, merger with a public company or selling Freedom assets, apparently influenced some family members to sell their stock.
“I just have been held hostage for so long that I wanted to take control of my own life,” shareholder Rick Oncken said.
