March 15, 2016 Last Updated 4:08 pm

DOJ tells Freedom Comm. lawyers that selecting Tribune bid ‘poses serious risk of harming readers’

With the auction for the assets of Freedom Communications, including the Orange Country Register, set for tomorrow, the DOJ fires a warning shot across the bow

The U.S. Department of Justice has sent a letter to the lawyers representing Freedom Communications letting them know they may face problems should Tribune Publishing win a bid for their assets, which include the Orange County Register and the Riverside Press Enterprise.

OCR-3-15“Given the auction that will be occurring on March 16, 2016, we felt it important to communicate to you our current assessment from a competitive perspective for the bidders that we understand may be be interested in acquiring the Freedom assets,” wrote William J. Baer, Assistant Attorney General.

“In particular, we wish to inform you that, based on our review to date, the division believes that the acquisition of the Freedom assets by Tribune Publishing Company poses a serious risk of harming newspaper readers and advertisers in Orange County and Riverside County. If Freedom selects Tribune as its purchaser, the Division will exercise its antitrust law enforcement responsibilities to ensure that the transaction does not deprive newspaper readers and advertisers in these areas of the benefits of competition.”

This is a problem, a big one. The other bidder is Digital First Media, which placed a successful ‘stalking horse’ bid of $45.5 million. This set the minimum bidding price. The problem is that Digital First Media is a sick puppy, a part of it having gone through its own bankruptcy proceedings, and a failed attempt to sell off the company. Just today the Columbia Journal Review wrote about staff cutbacks at the Denver Post and the resignation of one of the paper’s editorial writers, Jeremy Meyer.

DFM owns Southern California newspaper properties such as the Los Angeles Daily News, Torrance Daily Breeze and Long Beach Press-Telegram. But the big company in town remains Tribune Publishing, which not only owns the Los Angeles Times, but also the San Diego Union-Tribune. But Tribune Publishing was spun off from The Tribune Company a while back, and saddled with a ton of debt.

“It’s heinous,” Michael Ferro, chairman of Tribune Publishing recently said. “Who spins off a company our size with $350 million in debt and a $50 million balance? It’s very backwards that the government allows this.”

Well, company execs who get a payday do things like that, that’s who.

So, now two companies, badly in debt, will bid against each other to see who can dominate a very wealthy part of Southern California, with one company probably hoping it doesn’t win, and the other fearful that if it does win the auction it will have some hefty legal fees coming in its attempt to convince the DOJ that the deal will be a good one for residents.

Note: a third bidder, an investor group headed by Freedom CEO Rich Mirman, may be the preferred bidder here. But such a bid would need to exceed the ‘stalking horse’ bid, and likely would involve private equity funding. That comes with its own set of problems, but would set up a situation preferred by anti-trust authorities: three separate newspaper companies competing, at least for a while.

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