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by Steinberg & Sorkin
Wednesday, Aug. 20, 2003 at 12:23 PM
Freedom has long advocated a libertarian point of view on the editorial pages of its 28 daily papers and 8 tv stations. Today the company is one of the nation's largest newspaper publishers estimated to be worth about $2 billion.
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Freedom Communications Pulled Into a Family Fight
JACQUES STEINBERG and ANDREW ROSS SORKIN, New York Times, August 19, 2003
Freedom Communications has always played the iconoclast among the nation's media companies.
Freedom, the family-controlled company that owns The Orange County Register, 27 other daily newspapers and 8 television stations, was founded in the 1930's by R. C. Hoiles, a former printer's apprentice who steeped himself in the writings of Ayn Rand. True to that heritage, Freedom has long advocated a libertarian point of view on its editorial pages and often in the boardroom. To this day, it pays a college professor $50,000 a year to serve as its "adviser on libertarian issues," exposing its top managers at semiannual retreats known as "freedom schools" to a philosophy that emphasizes the rights of the individual over those of the government.
Given all this reverence for the individual, it should come as little surprise that as the nearly 85 shareholders or their representatives gather today at a Hilton conference center near Dallas to listen to formal bids for their company, they have yet to agree on whether Freedom is even for sale.
Freedom is estimated to be worth about $2 billion, making it one of the nation's largest newspaper publishers. The list of suitors, which according to participants could number as many as 12, includes at least four media companies — Gannett, MediaNews Group, Journal Register Company and Lee Enterprises. A fifth bid comes from a coalition of family members, some of them in the fourth generation of Hoiles descendants. That group, which is seeking to buy out those cousins who wish to sell their shares, is backed by Providence Equity Partners and the Blackstone Group, according to people involved in the bidding. Other interested investment firms are thought to include Kohlberg Kravis Roberts; Thomas H. Lee Partners; Spectrum Equity Investors; and Madison Dearborn Partners.
But for one bidder to sway a majority of the family shareholders will not be easy. Many of the grandchildren and great-grandchildren of Mr. Hoiles, who had three children and who died in 1970, have clashed in meetings and occasionally in court.
Their disputes have ranged from which branch of the family should control the company, based in Irvine, Calif., to almost metaphysical debates over what it means for a company to be run on libertarian principles. And the family members have tried for years, without success, to resolve how someone can sell shares in the company.
"You've got people who have disagreed with each other, almost from birth," said Alan Bell, who was hastily installed as the company's president and chief executive last August, after the family-led board fired his predecessor over disappointment with earnings.
"The pressures that have built up over time are almost horrific," Mr. Bell said. "That's why they're in the position they're in."
The decision to solicit bids for Freedom was initiated last summer by Tim Hoiles, a grandson of R. C. Hoiles, who owns 8.6 percent of the company. Mr. Hoiles, 51, a former publisher of several of the company's newspapers, including The Daily Press in Victorville, Calif., had been seeking for some time to persuade his relatives to let him sell his shares. All he says he wanted was "a fair price."
In a telephone interview yesterday from the conference center near Dallas where the family was gathering, Mr. Hoiles said that he had rejected an offer from Freedom earlier this year to buy him out for $100 a share — for a total of about $60 million.
His investment advisers, he added, had estimated his shares were worth closer to three times as much.
But the persistence of Tim Hoiles, one of 6 family members who sits on the 12-member board, paid off when a narrow majority of family members voted to explore a sale or merger. But some board members acknowledged privately that they did so to see what the company was worth.
And even if they decide to sell, they may not want to part with all of the company, according to people involved in the transaction.
A recommendation on what deal or deals, if any, to present to shareholders will be made by the 12-member board of Freedom, after gauging the family members' receptivity to the various bidders and seeing the actual offers.
Then, as soon as early fall, that recommendation will be put in front of the company's shareholders, nearly all family members, who will cast the nearly 8 million shares.
Battling Tim Hoiles is a coalition of younger family members who want to keep the company while buying out the recalcitrant relatives. The coalition is led by Thomas W. Bassett, one of Mr. Hoiles's cousins. Each faction thinks it has received tentative commitments from those voting at least 40 percent of the shares. That will make the swing votes the object of much wooing, most notably a retired California judge who will vote on behalf of the estate of a grandson of R. C. Hoiles who died three decades ago. And because many of the families will vote their shares in blocks, particular attention has been paid to another granddaughter of R. C. Hoiles, whose four children are said to be split 2-2 on whether to sell their shares.
Mr. Bassett is also expected to call on the loyalty of two uncles who serve on the board. Both are married to daughters of Clarence Hoiles, the older of R. C. Hoiles's two sons. They are R. David Threshie, the chairman of the board, who is married to Judith Ann Hoiles, and Richard A. Wallace, who is married to Patricia Hoiles Wallace.
Neither Mr. Wallace nor Mr. Threshie responded to telephone messages left yesterday. But Tim Hoiles said: "I believe we are one of the most dysfunctional families that own a business in America."
"Let people get out," he added. "Then you don't have to put up with them."
In one sense, Tim Hoiles's agitation and disaffection was inherited. His father Harry, the younger of R. C. Hoiles's two sons, filed suit in Orange County Superior Court in the late 1980's to break up the chain as a means to achieve what he described as his "fair share." The suit was dismissed in June 1987. (Harry Hoiles died in 1998.)
For libertarians, many of whom have been paying careful attention to the developments, more than money is at stake in the possible sale.
Few newspaper publishers have provided libertarians with the megaphone given to them for decades by R. C. Hoiles. He liked to refer to public schools as "government schools" and did not believe that newspapers should endorse political candidates because that entailed putting pressure on readers.
In recent months, for example, The Register has argued against American intervention in Liberia and has seen some merit in the Pentagon project, now abandoned, that would have permitted betting on future terrorist attacks. The news pages of Freedom's papers, however, are not expected by the owners to hew to a libertarian credo.
If The Register — which is based in Santa Ana, Calif., and which has an average circulation of 307,200 — is sold, some libertarians worry that the next owner might not be as sympathetic to such points of view.
"I think it's valuable," David Boaz, the author of "Libertarianism: A Primer" (Free Press, 1997), said of the Register's editorial page. "I would certainly be disappointed if it ceased to play that role."
Some of the family members who wish to retain control of the company are seeking to ensure that R. C. Hoiles's political point of view lives on. Others who wish to sell have argued that the family might be able to find a way, contractually, to continue to have a hand in the editorial pages of the newspapers.
Some bidders have even included language to this effect in their proposals, those close to the deal said.
But Tim Hoiles said he felt no such sentimentality. The company, he argues, has already strayed from its roots. His grandfather, for example, had divested the company of its radio holdings because "he did not want to be in a business licensed by the government," Mr. Hoiles said. By that logic, he added, his grandfather would be angry that Freedom now owns broadcast television stations (including the ABC affiliate in Providence, R.I., and the CBS station in West Palm Beach, Fla.) that are regulated by the Federal Communications Commission.
No one who has followed the company's twists and turns would be surprised that the highest bidder may not be the winner.
The faction led by Mr. Bassett is not expected to offer as much money as companies like Gannett, which can probably justify a higher bid because of the substantial cost savings other publishers could bring to a deal.
In a possible compromise, some family members have speculated that the company could sell some of its television stations while retaining much of the rest of the company.
Mr. Bell, the chief executive, who says he has raised earnings 15 percent in the first half of the year compared with last year, contends it is impossible to predict what will happen.
"Selling it is not necessarily the objective," he said. "The objective is liquidity. If you can get the people who want to leave to walk away with a fair price, that's the goal."
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