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Combined Offer for Freedom Disclosed

MediaNews-Gannett bid for the newspaper chain is $1.83 billion, sources say, surpassing one some family members favor.

October 14, 2003|E. Scott Reckard | Times Staff Writer

Topping previous bids for Freedom Communications Inc., USA Today publisher Gannett Co. and MediaNews Group Inc., which controls eight Southland newspapers, have teamed up to offer $1.83 billion in cash for the Orange County Register parent, according to people familiar with the details.

McLean, Va.-based Gannett, a public company that is the largest U.S. newspaper chain, and MediaNews, a private Denver concern, bid $235 a share for Freedom, which controls 65 newspapers and eight television stations, sources said.

Freedom, based in Irvine, has 7.8 million shares distributed among about 90 members of the Hoiles family. The patriarch of the clan, R.C. Hoiles, bought the Register for $750,000 in 1935. He died in 1970.

The Gannett-MediaNews bid eclipses previous offers, which had been described as being in the $210- to $230-a-share range.

These included an offer backed by fourth-generation descendants, who planned to buy out dissident family members using high-interest financing from takeover firms Blackstone Group and Providence Equity Partners Inc. That bid would keep family members on the board along with representatives of the investment firms.

It couldn't be immediately determined whether backers of the fourth-generation bid would be making a counteroffer.

Freedom spokeswoman Stephanie Miclot and various shareholders declined to comment on the new offer, first reported over the weekend in the New York Post.

Executives at Gannett and MediaNews wouldn't comment. Several shareholders also declined to comment, including Timothy C. Hoiles, one of R.C. Hoiles' grandsons. He has been among the most outspoken family members advocating selling the private company.

The deal, if completed, would add the Register, along with Freedom daily newspapers in Barstow and Victorville, to MediaNews' chain of papers ringing Los Angeles.

MediaNews owns the Los Angeles Daily News and the Long Beach Press-Telegram. In addition, it is the majority owner in a partnership with Gannett and Stephens Media Group that operates papers in Pasadena, West Covina, Whittier, Ontario, San Bernardino and Redlands.

The resulting company would be able to cut costs by sharing regional news. It would also provide an alternative to the Tribune Co.-owned Los Angeles Times for national advertisers aiming at a broad readership in Southern California suburbs -- a strategy that MediaNews Chief Executive William Dean Singleton has pursued through a series of acquisitions.

Analysts have described Gannett as the only company capable of buying Freedom outright without overdosing on debt, but the chain's previous bid for Freedom reportedly came in lower than others -- at just $200 a share, according to one knowledgeable source.

MediaNews, by contrast, has a considerable debt load. Recent filings show the company had nearly $900 million in long-term debt as of June 30, offsetting assets of $1.38 billion.

Still, it had planned to pay for Freedom by immediately selling its TV stations and sharing the acquisition cost of other assets with its partners in ventures such as the one it operates in Southern California.

The joint bid was described by one source as essentially two offers made at the same time, with a combined per-share value of $235 to Freedom shareholders.

Gannett, which has its own extensive network of TV stations, would buy Freedom's stations and other assets that fit with its current holdings, such as Freedom's newspapers in the Arizona and Florida markets.

In addition to the Southern California papers, MediaNews presumably would be interested in obtaining Freedom's No. 2 newspaper, the Gazette in Colorado Springs, Colo., which would complement MediaNews' flagship, the Denver Post.

Christa Sober, a Thomas Weisel Partners analyst who has followed the Freedom auction, said the latest twist "sounded screwy" at first. Sober had dismissed the possibility of MediaNews' bid prevailing as unlikely given the company's large amount of debt.

But she said Monday that with Gannett involved, it's now difficult to tell what the outcome may be.

"If you can cherry-pick the assets that most dovetail with your operation and you don't have to take on the debt that comes with swallowing the whole thing," Sober said, "maybe it can work."

Shares of Gannett, which owns 100 daily newspapers, fell 81 cents to $79.94 on the New York Stock Exchange.

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