In the mid-1920s, years before Raymond Cyrus Hoiles moved West and bought the Orange County Register, his increasing philosophical differences with an older brother over the operation of their three Ohio newspapers led to a bitter break-up of the partnership and a decade-long estrangement between the two.
More than half a century later, the scene is being played out again--at much higher stakes--as the heirs of R. C. Hoiles are locked in a battle over Freedom Newspapers Inc., the family-owned corporation that owns the flagship Register, 28 smaller dailies and five television stations.
The battle for control or dissolution of the profitable chain pits the family of Harry Hoiles against the families of his sister, Mary Jane Hoiles Hardie, and his late brother, Clarence. The three are R. C. Hoiles' children, and their families each own about a third of the privately held company.
The feud mirrors the internecine warfare that has afflicted other large media chains. Once such a fight begins, analysts say, family control of the newspaper seems destined to end.
At the root of the Freedom Newspaper fight is the unorthodox libertarian philosophy of the late R. C. Hoiles, a philosophy that extols self-reliance and voluntary action and abhors government interference.
Harry, 69 and the youngest of Hoiles' sons, both looks and writes more like his father each year, those close to him say. He charges that other family members have abandoned R. C.'s brand of libertarianism.
Hoiles says he wants ownership of the chain--or a reasonable price for his third of it--so that he can continue using newspapers to keep his version of the libertarian flame burning.
Three weeks ago, Hoiles made his third bid to buy the company. He valued Freedom at $1.01 billion and offered either to buy the other family members' shares for a total of $682.5 million or to sell them his shares for $330 million. Hoiles still is waiting for an answer, but in rejecting his previous offers Freedom's majority owners said they will not sell to Harry Hoiles and his family at any price.
"There's a lot more family jealousy (at play) that makes the price irrelevant," said analyst Bruce Thorp of John Morton & Co.
Even so, establishing a value for Freedom Newspapers is important to Harry Hoiles. In the absence of a sale, he is pressing a lawsuit to dissolve the corporation. Hoiles wants an Orange County Superior Court judge to end the family squabbles by dividing Freedom's assets equally among the shareholders. The trial is scheduled to start April 7.
Some Wall Street analysts believe that even if Harry Hoiles is blocked, the fate of Freedom Newspapers eventually will be that of most other large, family-owned newspapers. As stock is dispersed among more and more offspring in the third and fourth generations, they say, shareholders who have no control individually will tend to sell out to the highest bidder.
For now, the internal dissension has brought to light some previously secret financial information about the closely held company.
In court documents filed in support of his dissolution suit, for example, Harry Hoiles revealed that in 1981, a few months before he died, that Clarence Hoiles valued Freedom Newspapers at $834.9 million in a short-lived proposal to give Harry a one-third interest in the Register and eight of the chain's other newspapers.
Other family members, the documents say, convinced Clarence that Harry should be considered only a minority shareholder and that he should only get a discounted price of $74.1 million in any family purchase of his shares.
Freedom's financial performance record also has seeped out. Freedom's revenues hit $295.8 million last year, a company source told The Times. That is 61.4% higher than the gross revenues of $181.5 million that Clarence Hoiles cited in his 1981 sale offer to his brother. Forbes magazine reported the corporation's net income last year at $26.4 million. The Register, with 292,583 daily subscribers, represents about half of Freedom's revenues and cash flow, according to company officials.
In rejecting the 1981 offer to buy him out for a discount, Harry Hoiles argued that assets should be equally divided.
But Robert C. Hardie, Freedom Newspapers' chairman and Hoiles' brother-in-law, argues that there is a distinction should be drawn between owning a corporation's stock and owning its assets. A corporation, he says, "is a voluntary association. You don't have to become part of it. A share of stock is not equivalent to a share of assets."
Industry analysts have mixed views on whether Harry Hoiles would find it worthwhile to sell his stake in the corporation to outsiders.
In a sale, legal fees, filing fees and other costs "could equal a quarter or more of the proceeds," said analyst John Morton, who has been hired by the corporation's majority shareholders as an expert witness in the coming trial.