Tribune Publishing says temporary restraining order would kill O.C. Register bid

The Orange County Register building in Santa Ana. The paper's parent, Freedom Communications, will be sold to Digital First Media.

The Orange County Register building in Santa Ana. The paper’s parent, Freedom Communications, will be sold to Digital First Media.

(Rick Loomis / Los Angeles Times)

Tribune Publishing’s purchase of the Orange County Register and Riverside Press-Enterprise is doomed if the U.S. Department of Justice obtains a temporary restraining order on antitrust grounds, the owner of the Los Angeles Times argued Friday.

The publishing company’s $56-million cash offer for the two newspapers owned by bankrupt Freedom Communications was selected as the highest bid at a Wednesday auction. The federal government sued in U.S. District Court the next day to block the sale, arguing it would harm consumers and advertisers.

Tribune, in a response filed Friday morning, said that Freedom will run out of financing March 31 and that any delay in closing the sale would force the Santa Ana newspaper publisher to accept a rival lower bid or liquidate the papers.


Tribune attorneys described a restraining order as a “death-knell” to the bid, which would cause harm not only to Tribune but to Freedom’s creditors and the public.

A U.S. Bankruptcy Court judge is scheduled to consider approval of Tribune’s offer for Freedom at a Monday hearing in Santa Ana. There has been no hearing set to consider the request for the restraining order, which is being decided by a different judge.

“The [Justice] Department has the leverage,” said Warren S. Grimes, an antitrust professor at Southwestern Law School. “The bankruptcy judge is not likely to wait for a trial.”

One solution could be for Tribune to agree to certain conditions on its purchase, said William Markham, an antitrust attorney in San Diego. Tribune could agree to operate the Register and Press-Enterprise separately from The Times, allowing the newly acquired dailies to still set their own subscription and advertising prices.

Or Tribune could acquire only one of Freedom’s papers, but not both.

But such scenarios may not be palatable to the government or Tribune Publishing, which is looking to extend its reach in Southern California and save money by streamlining business
operations at a challenging time for the newspaper industry. The company identified $24 million in potential “cost synergies” across several departments.


If Tribune has to make too many concessions, “It may defeat the very purpose,” Markham said.

If Tribune’s bid fails, Digital First Media, the owner of the Los Angeles Daily News, probably would be the next in line — though its bid was valued as much as $13 million less for the estate, according to Tribune’s filing. A group of Freedom insiders pulled out of the auction prior to its start, but their attorney, Leonard Shulman, has said they are willing to step in as a third alternative.

A lower sale price means that some creditors would receive less money, Tribune said in its filing, including the government agency that guarantees Freedom’s pension plan. Some unsecured creditors might not be paid at all, including employees owed benefits since Freedom filed for bankruptcy.

In its request to block the sale, the Justice Department argued that the deal would allow Tribune to raise prices to advertisers and subscribers by controlling 98% of English-language
local daily newspapers for sale in Orange County. In Riverside County, Tribune, which purchased the San Diego Union-Tribune last year, would own four of the top five English-language newspapers by circulation, according to the department.

Tribune and some media and antitrust experts have criticized the government’s argument as outdated. With the advent of the Internet, consumers and advertisers have far more choices than decades ago, they said.

“For better or worse, the court and the government need only look at the phone in their pocket to understand that the trend toward digital content is accelerating,” Tribune said in its filing.

That transition is evident in newspaper circulation in Southern California. The Times, Orange County Register, Riverside Press-Enterprise and San Diego Union-Tribune had a combined Sunday circulation of 1.2 million in the third quarter of last year, according to Alliance for Audited Media. In 1990, the L.A. Times alone boasted a Sunday circulation that topped 1.5 million.

Advertising revenue has also fallen. In 2010, The Times’ advertising revenue was $435 million, compared with $249 million last year, according to a declaration from an economist in support of Tribune’s filing.

Tribune argued that a judge should deny the restraining order because the government has other options, such as pursuing its antitrust litigation after the deal has closed.

In a response filed Friday afternoon, the government asserted that unwinding the sale is not so simple. It said Tribune plans to “fire large numbers of employees after the merger — and substantially reorganize the combined papers’ printing and newsroom operations.”

“If Tribune takes actions like this, the court could not later ‘unscramble the eggs’ and restore the Register and Enterprise to the competitive position they are in today,” the filing said.

Shares of Tribune Publishing closed at $8.03 Friday, down 26 cents, or 3.1%.