Learning Curve for a Newspaper Dynasty
Until last year, many of R.C. Hoiles’ great-grandchildren showed little interest in running his Freedom Communications Inc.
In fact, their plan to keep the publisher of the Orange County Register under family control initially generated jeers from older relatives who wanted to cash out.
At a show-and-tell meeting in August with potential bidders for the Irvine-based media company, one family member “asked if someone could explain what interest payments were,” said Timothy C. Hoiles, a grandson of the founder who owns 8.6% of company shares and wanted to sell.
“It was like dealing with a bunch of sixth-graders,” said Hoiles, 51, who was a publisher of Freedom papers in Pampa, Texas, and Victorville, Calif., during the 1970s and 1980s.
Nonetheless, Freedom’s board -- Tim Hoiles included -- last week endorsed a proposal offered by the fourth generation of Hoileses to have two private investment firms, Blackstone Group and Providence Equity Partners, buy stock at $220 a share from those who wished to sell. If shareholders approve the plan as expected, family members who retain some or all of their stock intend one day to repurchase the two firms’ stakes.
Reaching that goal would require tough choices about buying and selling assets, cutting costs and increasing advertising rates, issues that are foreign to most of the fourth-generation trust fund beneficiaries. But they believe that it’s their duty -- and not simply their desire -- to preserve the 68-year-old company and the independent-mindedness inculcated by their late patriarch, R.C. Hoiles, an ardent libertarian.
“This generation has stepped up and said we want to hold on to this company,” said Robin Hardie, 33, a journalist who worked at two Freedom papers and now heads a council representing all branches of the family. “We believe in its philosophy, its associates and the communities it serves.”
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In Over Their Heads?
It remains to be seen whether three dozen or so members of the fourth generation -- G4s, as they are called, who are in their 20s, 30s and 40s -- will be fresh blood for the company or just blood in the water for the buyout firms, which are investing in Freedom with expectations of hefty returns.
At least one losing bidder thinks the fourth generation is in over its head.
“Blackstone will have their money out in three years and will be in control, and the shareholders who are stuck with the stock will be sitting there not knowing what ate them,” said newspaper mogul William Dean Singleton, who engineered a joint bid by his MediaNews Group and USA Today publisher Gannett Co. that offered to buy Freedom outright for $1.83 billion.
The board rejected that option in favor of the G4 plan, which valued the company at $1.72 billion. Still, Singleton predicted: “I’ll be back in three years, buying the company from Blackstone, for a lot less.”
Blackstone and Providence executives said their aim was to work with the family, describing the plan -- most details of which have not been disclosed -- as providing many options other than an eventual sale to Singleton or a rival chain.
Certainly there is much to work with: Freedom, the nation’s 12th-largest newspaper chain, has 28 daily newspapers with 1.2 million subscribers and 37 weeklies, as well as eight television stations.
The fourth-generation relative who shepherded the buyout plan, St. Louis accountant and lawyer Thomas W. Bassett, has refrained from publicly responding to Singleton’s remarks and declined to comment for this article.
The 39-year-old Bassett appears more subdued than some in his clan; the passions of Timothy Hoiles, for example, include big-game hunting and Harley-Davidson motorcycles in addition to publicly berating his relatives.
Bassett, a former Freedom board member who practices tax and estate-planning law, failed at first to persuade the board to endorse his plan but “waited for a couple of months, called up a few of us and said we’re going to do it ourselves,” Hardie recalled.
For some of the fourth generation, that has meant grooming themselves for succession.
Hardie, her cousin Susan Barrett and others have attended family-business seminars at Northwestern University’s Kellogg School of Management. Hardie and others are planning to take a lead role in selecting new family members to the board. Raymond C.H. Bryan, 32, the only fourth-generation member on the current board, is working on a graduate business degree at Fordham University in New York, studying broadcasting.
“As part of my MBA I have been doing research in the TV area,” he said in a recent letter to the clan. “This term in fact I will have two classes pertaining to broadcast.
“While as a family we know the newspaper space fairly well, we do not have a family member that has run a TV property,” Bryan wrote.
Details of the full proposal won’t be known until a proxy containing the proposal is mailed to shareholders in a few weeks.
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Question of Direction
Among the most important components was the option for some to cash out, which had to be balanced by the demands of others to remain and maintain the libertarian voice on Freedom’s editorial pages that has sounded since 1935, when R.C. Hoiles bought what was then the Santa Ana Register for $750,000. The options presented in the pending plan “not only satisfy these goals but also produce a stronger company going forward,” proponents said in a statement last week.
Yet who will be in control of a recapitalized Freedom is still to be determined. The proposal calls for 13 directors, with four representatives from Blackstone and Providence, four independent directors and the company’s chief executive joining four family members. Details about how a CEO will be selected once the plan is finalized were not yet known. In the meantime, current CEO Alan Bell will remain in the post.
But which family members? The recent disputes centered on complaints by Tim Hoiles and David C. Hardie, his cousin and fellow board member, about Freedom’s direction under the leadership of a third-generation trio known as the Three Ds -- Chairman R. David Threshie, who is Susan Barrett’s father; Richard Wallace, who is a family liaison to libertarian groups; and Texas newspaper publisher Douglas Hardie, David Hardie’s older brother and Robin’s father.
As their confrontations flared up over the last two years, complicated by resentments and rivalries that go back decades, the younger generation tried to look forward instead.
“The Freedom on the other side of the mountain we’re currently facing is a Freedom with freedom -- there is a way out for those who wish to leave and those who stay do so because they choose to,” Barrett, 40, said in a letter to shareholders last November.
“We must tune out the distractions around us -- the arguing, the ugly press accounts, the personal attacks and the attempts by some to derail the continuity of this awesome enterprise,” she wrote.
Barrett’s cousin Melanie Coslor, from a free-spirited branch of the Hardies that lives in Boulder, Colo., weighed in two months later, saying: “We all play a part in keeping things messy. How do we clean this up? No matter what the outcome, let’s do things well.”
For what has been a notoriously fractious family, trying to pass control to the fourth generation “is extremely unusual,” said consultant Dean Fowler, the author of “Love, Power & Money: Family Business Between Generations.” Only three in 10 family businesses survive to a second generation, he said, and only about 5% continue to the fourth.
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Empowered by Choice
Typically, once family members have the option of selling, they don’t rush to unload shares, he added.
One fourth-generation Hoiles descendant said his research showed the same thing, suggesting that though many shareholders may sell small amounts of stock, the total sold may well be no more than 25% of Freedom’s 7.8 million shares.
“Studies of family companies have shown that what’s really important is having the opportunity for liquidity, not selling everything,” the insider said.
That could be among the reasons the fourth-generation plan seems to have support among the company’s 90 shareholders. Family members said the proposal benefited from the fact that the market for initial public offerings, mergers and acquisitions dried up in early 2002, which meant the buyout firms had an abundance of time to devote to the deal.
President Bush helped things along by pushing a capital-gains tax cut through Congress, making stock sales more palatable to some family members.
And it’s possible the deal will be completed just as newspaper advertising is beginning to reverse a long downturn; several public newspaper companies, including Tribune Co., owner of The Times, reported substantial increases in national ad sales during the third quarter ended Sept. 30.
Having finally come close to achieving his goal of selling shares, Timothy Hoiles was conciliatory, saying Friday: “I wish the ongoing family members only the best and I know that they will continue the family tradition of the newspaper business and the libertarian philosophy that is so very important to them.”
Robin Hardie and her cousins are ready to try.
“There is some validity to the statement that we’re young and inexperienced,” she said, “but we have a lot of different skill sets we bring to the table.”
