Tribune Publishing wins the Freedom Communications auction with $56M bid, to add the OC Register to SoCal holdings
Update: The Department of Justice, shortly after auction announcement, filed suit in an attempt to prevent the sale to Tribune from proceeding, saying they fear it would create a regional monopoly
Tribune Publishing, publisher of the Los Angeles Times, has won the auction to pick up the assets of bankrupt Freedom Communications, bidding $56 million in cash to win the Orange County Register and Riverside Press Enterprise. The company won the auction over rival Digital First Media, which also publishes papers in Southern California including the Los Angeles Daily News and Long Beach Press-Telegram.
DFM had successfully submitted a ‘stalking horse’ bid of $45.5 million, so Tribune’s bid ended up considerably higher than the minimum bid allowable.
The bid must now be approved at a Monday bankruptcy court hearing, which is likely to happen, despite a warning from the Department of Justice of anti-trust concerns. On Tuesday of this week, lawyers for Freedom Communications were warned in an emailed letter that they may face problems should Tribune Publishing win a bid for their assets.
“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.”
Later on Thursday, the Department of Justice filed suit (see here).
It is unlikely that this would have caused management at Tribune to hesitate in bidding on the Freedom properties, the lure of owning a near monopoly in Southern California had to be great. Tribune now owns – from south to north – the San Diego Union Tribune, Orange County Register and the Los Angeles Times.
The newspaper auction was not an uneventful event, reports the Register.
An investor group led by Freedom Communications CEO Rich Mirman walked out of the auction. Mirman’s group had bid $45 million, which while below Tribune’s bid at that time of $46 million, also included the offer to pick up the pension obligations of the company – something neither Tribune nor DFM was interested in committing to.
As the bidding was to start – after lengthy delays – Mirman’s investor group was told it had to add $5 million in cash for creditors to waive the right to sue the group’s principal players – Mirman, Freedom Chairman Eric Spitz and Santa Ana developer Michael Harrah, according to Shulman.
“It was an irregular and unreasonable request over bogus claims,” Shulman said.
The prize here, the Orange County Register, has a history that goes back to 1905. But the paper really became valuable as the area south of Los Angeles grew following World War II, becoming the wealthiest of the suburbs surrounding Los Angeles. In 1979, R. David Threshie became publisher and within a couple of years the Register would surpass Hearst’s Los Angeles Herald Examiner as the area’s second largest daily behind the Los Angeles Times.
Heirs to the ownership, though, brought in private equity firms in 2004, leading a quick weakening of the fortunes of the paper. In 2009, Freedom Communications filed for Chapter 11 bankruptcy protection leading to the paper falling into the hands of another group of PE firms, Alden Global Capital, Angelo Gordon & Co., Luxor Capital Group, as well as a lender group led by JPMorgan Chase.
Then in 2012, the paper was sold to Aaron Kushner and Eric Spitz and their 2100 Trust group for $50 million. The next year the new ownership bought the The Press-Enterprise in neighboring Riverside County for $27.25 million. The new owners then tried their hand at newspaper launches in nearby Los Angeles and Long Beach, a disastrous experiment that lasted six months and led to massive layoffs, and eventually to the company filing for bankruptcy once again in November 2015.
Here is Tribune Publishing’s announcement for its winning auction bid:
ORANGE COUNTY, Calif. – March 17, 2016 — Tribune Publishing Co. today announced that it, through its subsidiary Orange County Media, LLC, was the successful bidder at a public bankruptcy auction to acquire substantially all of the assets of Freedom Communications, Inc. Under the terms of the bid, Tribune Publishing has agreed to pay $56 million in cash for the business of Freedom Communications and its owned real estate in Santa Ana, California and Riverside, California.
Tribune Publishing’s successful bid is subject to Bankruptcy Court approval at a hearing that is currently scheduled for March 21, 2016. The transaction is subject to customary closing conditions.
“The successful bid for the business of Freedom Communications will allow the Orange County Register and the Press-Enterprise to continue providing a distinct local voice in their communities and deliver premium news and information to consumers across Southern California,” said Justin Dearborn, CEO of Tribune Publishing.