A council representing the family that owns Freedom Communications Inc. met Monday to consider which clan members should be on a reconstituted board of directors if the Orange County Register parent completes a deal to become a partner with two East Coast buyout firms.
The family council, which discusses concerns of Freedom shareholders and conveys decisions to executives operating the business, met at the company's Irvine headquarters to talk about a dozen nominees for the four family directorships on the proposed 13-member board. By late in the day, there was no word on whether the group had reached any decisions.
In addition to four family directors, there also would be four independent directors and four who would represent Blackstone Group and Providence Equity Partners, the investment firms that have agreed to recapitalize Freedom by buying shares from dissident family members.
The family council's choices would be reviewed by independent directors on Freedom's current board and its proposed new investors to make sure the clan members are "broadly acceptable," said Alan J. Bell, Freedom's chief executive, who would remain in his position and become the 13th director on the new board.
"This is a new partnership, and it's truly a partnership, where everybody has a voice," said Bell, a veteran broadcasting executive who is not a member of the family.
Family shareholders aren't expected to vote on the proposed recapitalization until later this year or early next year, and Freedom's current board was scheduled to hold a regular meeting today to discuss next year's budget.
Bell delivered good news to shareholders last week about this year's financial results, saying the private company's free cash flow -- a measure often used to value media companies -- was up 16% year to date, easily beating budget projections.
Freedom, founded in 1935 by libertarian firebrand R.C. Hoiles, has been split for three decades by feuds among his descendants even as it grew to include 28 daily newspapers, 37 weekly publications and eight TV stations.
After a two-year campaign led by dissident grandson Timothy C. Hoiles, Freedom's board voted Oct. 14 to allow outside investors to buy stock from family members for $220 a share.
The proposal with the two firms allows both to eventually take their money out of the company -- an event family members said could occur in five to 10 years. To allow them to exit, the company could go public, sell itself outright, merge with another company or borrow from another source to again recapitalize, Bell said.
The agreement containing the proposed deal, which is the size of a large phone book and couched in dense legalese, went out to the 90 family shareholders last week.
A lengthy proxy statement with more straightforward language had been expected to be sent out Saturday, although Bell said Monday that it may be delayed.
Bell declined to comment on the terms of the agreement, but several people who have seen it said it pledged to maintain Freedom's regular dividend if at all possible, an important factor for many Hoiles family members who count on the payments.
The annual dividend currently is less than 1% of the company's $1.72 billion in value as gauged by the private equity firms' offer.
The individuals familiar with the agreement said the buyout firms would receive the standard dividend and also a special payment in kind in stock, which would add 1.5% each quarter to whatever shares they buy from family members.
Under that formula, for each 1 million shares of stock the firms bought, they would have more than 1.8 million shares if they waited 10 years before cashing out -- an incentive to stay invested but also a significant dilution of the family's stake.
The agreement provides that the buyout firms initially can have no more than 49.9% of the voting shares of the company's common stock even if they purchase more than 50% of the family's 7.8 million shares.