[wta-politics]NYT: Freedom Communications Pulled Into a Family Fight

[Premise Checker]

Freedom Communications Pulled Into a Family Fight
NYT August 19, 2003
 By JACQUES STEINBERG and ANDREW ROSS SORKIN 

[Bob LeFevre was editor of the editorial page of the Colorado Springs
Gazette-Telegraph, as it was called then, back in the 1960s. Today, it
does have some libertarian columnists but they are drowned out by
neo-cons. I did not know that the 'freedom schools' continue to the
present. Bob could get lots of the all-time libertarian greats to come to
Freedom School, later Rampart College, since there were hardly anyone else
who wanted them. Today, they would all command big speaking fees. They
were almost as shunned as racists today but now they get a seat at the
table.]
 

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." 



http://www.nytimes.com/2003/08/19/business/media/19FREE.html?ex=1062320741&ei=1&en=bb801f8467933797


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