When Harry H. Hoiles made his $902-million offer this month to buy out his relatives' interest in Freedom Newspapers, he said the offer had nothing to do with the lawsuit that he filed in 1982 seeking to dissolve the Santa Ana-based media corporation.
But as that suit proceeds toward its scheduled Jan. 20 trial in Orange County Superior Court, the offer will play an important part in determining how much the company is worth and how much Hoiles would receive if he opted to sell his shares and leave the company.
Hoiles' longstanding threat to sell his stock to outsiders if he doesn't get his way gives the 68-year-old former Freedom Newspapers president a heavy cudgel to wield in future dealings with his estranged relatives, who hold most of the company's stock.
Freedom's corporate attorney, John R. Stahr, said Friday that a public sale of Hoiles' shares would destroy a key underpinning of the 58-year-old company: the private ownership that allows family members to keep their business dealings from the public.
But Hoiles admits that he really isn't interested in selling.
Colorado Springs Paper
In an interview Friday, he said he hopes to force the other family members to divide Freedom's holdings and give him control of a number of the company's newspapers, including the 100,000-circulation Colorado Springs (Colo.) Gazette-Telegraph.
Directors of Freedom Newspapers, which publishes the Orange County Register, the Gazette, 27 smaller dailies and three weekly newspapers and owns four television stations, rejected Hoiles' buy-out offer in a 9-4 vote Thursday. Chairman Robert C. Hardie said the company is not for sale at any price.
Freedom is a privately owned corporation whose shareholders are family members of the three children of founder Raymond Cyrus Hoiles. About 50 investors control the stock in Freedom Newspapers. Each of the three branches of the family holds about one-third of the stock.
Harry Hoiles and his relatives had a falling-out in the late 1970s. The families of his late brother, Clarence, and sister, Mary Jane Hoiles Hardie, twice offered to buy the shares that he controls for himself, his wife and their three children.
The $902-million offer rejected Thursday "is over four times their offers to us several years ago," Hoiles said in Friday's interview.
"What I want is a third of the assets, not necessarily the Register or the television stations. I'm interested in newspapers."
He is interested most, he said, in the Colorado Springs Gazette-Telegraph, the chain's second-largest newspaper. Except for the Register, which has a circulation of 291,619, no other paper in the chain has even 50,000 in circulation.
Though angry over being stripped of his power at Freedom Newspapers in the internecine warfare, Hoiles said he is just as upset over how his brother's and sister's families have strayed from the strict libertarian views of their father. He said he wants to use his own publications to further those views--which hold that taxation and most other governmental incursions into people's lives is wrong.
Hoiles, who still is a member of Freedom's board of directors, declined to discuss his specific plans for the future.
"I don't know just what to do," he said, "but I hope to settle the suit. Of course, I hoped to settle it four years ago. I offered to let them take first choice and I'd take the rest, but they refused that."
He said the business dispute has pretty much alienated him from the other branches of his family. "The only times we see each other is at board meetings," he said.
Hardie, the company's chairman, and corporate attorney Stahr refuse to discuss profits or the value of the corporation, declining even to comment on a report that last year's net income was about $26.4 million.
Hoiles revealed in his takeover bid that Freedom's 1984 revenue was about $322 million and that the company's cash flow--earnings after taxes plus depreciation--is more than $100 million a year.
"It's a very healthy company. It's debt free," said Hardie, who is married to Hoiles' sister, Mary Jane. "We have tried to let people know that we've never considered selling, and we don't want to sell."
In fact, he pointed out, his family and the family of the late Clarence Hoiles have signed a covenant that requires any member selling shares to give other family members or the corporation the right to buy them first. Harry Hoiles is not a party to the agreement.
Peter Kent, an investment banker with Henry Ansbacher Inc. of New York and an adviser to Harry Hoiles, said Friday that his client has at least two options besides selling his shares. He said Hoiles could make a higher offer to the board or try to generate an outside offer for the entire company.
Whatever he does, the principal issue is whether to value his shares at a third of the corporation's assets or as a much lower priced minority interest, as the Hardie-Hoiles coalition maintains that he should.
Hardie said ownership of a third of the shares is not the equivalent of ownership of a third of the assets, as Harry Hoiles claims.