Media Firm Bides Time

Shareholders who want to sell their Freedom Communications Inc. stock, along with at least one potential bidder, are complaining of being left in the dark as the family-owned company known for fractious battles slowly assesses offers that would allow dissidents to exit.

“We’re having conversations with them but the sense is that it’s going nowhere,” said a source close to one of the bidders, calling the process frustrating. “It seems like total indecision at Freedom’s end.”

It’s been nearly two weeks since a committee of five independent directors assessed and then presented to the full board 10 offers for all or part of the Irvine-based company. But instead of forwarding any bids for a vote by shareholders, board members asked the committee and its investment bankers “to explore which of these proposals may be developed to the point at which it would be appropriate to submit one or more of them to the shareholders.”

The company directors, some of them vacationing abroad, held a board meeting by telephone Sunday to discuss the offers, an indication that some headway was being made. But they reached no decision, said company spokeswoman Stephanie Miclot, who was unable to provide details on the discussion or say when the board would meet again.

Freedom, which controls the Orange County Register, 64 other newspapers and eight TV stations, previously had said that it intended to have the 90 family member shareholders vote on a deal by early November.

The best of the initial bids were reported to be close in terms of the price offered for the company, which amounted to about $1.7 billion excluding debt.

“It doesn’t surprise me that people would be concerned about when it’s going to happen,” Chief Executive Alan Bell said. “But I say: You can have it fast or you can have it right -- and we’re going to get it right.”

The deliberate pace “is a perfect example of how Freedom does business, and has done business in the past,” said Timothy C. Hoiles, a grandson of Freedom founder R.C. Hoiles. Tim Hoiles’ long-standing demands to turn his 8.6% stake in Freedom to cash led to the current bidding process, which the company calls its “liquidity auction.”

“It’s been 20 years of them saying we’re going to have liquidity,” Hoiles said. “I’m still waiting.”

The auction has been complicated by Freedom’s request that bidders for less than 100% of its shares address “soft issues,” including sharing board seats with family members and preserving the libertarian leanings of the editorial page that was R.C. Hoiles’ hallmark and legacy.

The complexity of the proposals and the family relationships had one potential seller of Freedom shares comparing it to “playing poker with nine people at the same time,” while another said it “is like a kaleidoscope. Every time you look at it there’s a different picture.”

Leading bidders were believed to include leveraged-buyout firms that would pay some shareholders, such as Tim Hoiles, to cash out, while partnering with other shareholders who want to sell some or none of their holdings. The firms aim for annual returns of about 20% by cutting costs to improve profits and quickly selling off certain business segments.

One such bid came from Blackstone Group and Providence Equity Partners, working with fourth-generation Hoiles descendants. A person with knowledge of that bid expressed cautious optimism that it would prevail, saying it was “very flexible” and would allow family members to continue receiving dividends unless “there was a severe economic downturn.”

At least one proposal -- by William Dean Singleton’s Denver-based MediaNews Group Inc. -- would entail an immediate sale of Freedom’s TV stations, cash cows that had an operating profit of nearly $40 million last year on $121 million in revenue. Freedom already had decided to sell the stations, according to sources close to the board, though not necessarily immediately.

In a regulatory filing, MediaNews also described the planned formation of new partnerships that would include Freedom newspapers. Freedom sources said that, according to the proposal, the Register would be combined with a Singleton-controlled partnership whose eight Southern California newspapers include the Daily News of Los Angeles, the Press-Telegram of Long Beach, the Sun in San Bernardino and the Pasadena Star-News.

Freedom shareholders who didn’t cash out would become minority stakeholders in the new enterprise. But some family members fear they could be lost, since the partnership they’d be joining already includes not only Singleton’s company, but McLean, Va.-based Gannett Co., and Little Rock, Ark.- based Stephens Media Group.

Gannett also made an offer for Freedom. Gannett, the largest U.S. newspaper chain, was believed to be the only bidder capable of buying Freedom outright without taking on an unmanageable debt load, according to newspaper analyst Christa Sobel at Thomas Weisel Partners. One Freedom source said Gannett’s offer came in lower than others but that it was possible it would be raised.

Meanwhile, Freedom CEO Bell -- who is not a family member and therefore not a shareholder -- said that “everyone is being as careful as they can to exercise due care” while evaluating a sale.

“It’s going to take as long as it takes to get it right,” he said.