Factors Could Work in Favor of Freedom's Value

Times Staff Writer

The financial markets might be wobbly with war fears, but analysts say Freedom Communications Inc.'s move to put itself up for sale won't be hurt by poor timing.

That's because large media companies such as Irvine-based Freedom -- owner of the Orange County Register -- are rarely on the market. And such scarcity keeps their values high, in good economic times or bad, said John Morton, an independent media consultant in Silver Spring, Md.

Also propping up Freedom's value, which has been estimated at $2 billion, is the widely held belief that the Federal Communications Commission is about to toss out restrictions on media companies' cross-ownership of print and broadcast outlets in the same market.

That could make companies such as Freedom "very attractive," said Michael Kupinski, a media industry analyst with A.G. Edwards & Sons.

"We think values could even move higher" with a loosening of ownership regulations, he said.

Freedom, one of the last remaining family-owned media empires in the country, operates the Register as well as 27 other daily newspapers, 37 weeklies and eight television stations. Its flagship, the Register, has been under family control since R.C. Hoiles bought the paper in 1935. But after years of squabbling among Hoiles' descendants, the board decided Wednesday to solicit bids for the sale or merger of the company.

Tim Hoiles, the grandson of R.C. Hoiles who pushed hard to cash out his 8.6% stake in Freedom, said Friday that an analysis done 10 months ago for family members valued the company's print properties at about $1.6 billion and its eight television stations -- all network affiliates -- at $400 million.

Analysts said those values haven't changed appreciably since then, despite a faltering economy, in part because big print media chains still generate a lot of cash from advertising.

Morton said he believes that the Register, with a daily weekday circulation of 320,000, and Freedom's second-largest property, the 99,500-circulation Colorado Springs Gazette, represent about half the value of the company's print holdings.

One insider estimated the Register could be worth about $600 million and the Colorado Springs paper about $200 million.

Gannett Co., owner of USA Today and scores of smaller newspapers as well as a number of television stations, has expressed interest in Freedom and appears to be a leading potential suitor for the company.

Analysts said Gannett is one of a handful of media corporations with the financial wherewithal to buy Freedom in its entirety.

"If Gannett is willing to pay, I'm sure they'll go after the whole thing," said Edward Atorino, media analyst with Blaylock & Partners in New York. "They've got $4.5 billion in debt, but they've got great credit, $900 million in free cash and a good balance sheet."

Analysts mentioned other potential bidders, including Dow Jones & Co. Inc., publisher of the Wall Street Journal; New York Times Co.; McClatchy Co., parent of the Sacramento Bee; and Tribune Co., which owns the Los Angeles Times. All have declined to comment.

If Freedom were to be parceled out, however, the number of potential buyers would increase to include smaller media companies such as William Dean Singleton's Denver-based MediaNews Group, which has said it is interested in some Freedom properties.

Gannett seems to be a favorite candidate not only because it has the financial underpinnings but also because the synergies make good sense, according to analysts.

Gannett owns, for example, the Arizona Republic in Phoenix, and Freedom operates suburban dailies in the nearby upscale communities of Mesa and Scottsdale.

Gannett has some small papers in Northern California, as does Freedom. Gannett also owns the ABC affiliate television station in Grand Rapids, Mich., where Freedom operates the CBS affiliate.

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