Barely eight months after emerging from bankruptcy, Freedom Communications, parent of the Orange County Register has put all its newspapers and television stations on the block. At a time of halting recovery for traditional media properties, the move is counter-intuitive, to put it mildly.
Who, if anyone, is a potential buyer?
Might the strategy be to sell some of the properties, keep others and reposition the company by investing the proceeds in digital ventures?
Freedom came out of bankruptcy with an unusually large remaining debt burden: $325 million. If it is not making turnaround progress, might management have decided to raise cash or even get out?
Since Freedom is one of a number of newspapers companies now owned by New York-based Angelo Gordon and other private equity partners, I don’t expect a lot of candid explanation to be forthcoming as the properties are being shopped.
But in their few guarded comments on newspaper acquisitions, private equity group executives have been typically saying that they expect to be hands-on managers for a period of at least four or five years before cashing in with a resale. Why would Freedom be so different?
Here is a little background.
- The bankruptcy process was the polar opposite of the contentious fights for control of Philadelphia Newspapers and Tribune Co. The fast-track bankruptcy was filed in September 2009 and completed six months later without incident. Most of Freedom’s debt was incurred in 2004 when one branch of the Hoiles family, with the help of the Blackstone Group, bought out other family members who had been pressing for a sale.
The company has 100 daily and weekly newspapers, all of them much smaller than the flagship Register. It owns eight televisions stations in mid-sized markets, the largest West Palm Beach.
Here are some tea leaves.
This sale could signal that Freedom is headed toward a future as a predominantly digital company.
When transitional CEO Burl Osborne, former chairman of the Associated Press and longtime publisher of the Dallas Morning News, left Freedom, he was replaced by Mitchell Stern, who once ran Fox Television Stations, Inc. Earlier this month, Stern named another former Fox executive, Thomas Herwitz, to run the TV station group. Freedom is reportedly asking $400-500 million for its broadcast properties.
Larry Kramer, the digital entrepreneur who built MarketWatch, which Dow Jones ultimately acquired for $500 million, joined the Freedom board this summer.
- Freedom has been aggressively developing mobile phone apps for several years, and the Register was one of the first regional papers this summer to pilot an iPad app as well.
This sale could signal a California consolidation play.
Industry chit-chat has suggested the huge South California market could be ripe for consolidation. Tribune owns the Los Angeles Times, and the San Diego Union-Tribune was sold last year to a private group headed by Platinum Equity of Beverly Hills. Dean Singleton’s MediaNews group owns a number of suburban Los Angeles papers.
- While the pace of mergers and acquisitions has been picking up lately, none of any scale have taken shape among newspapers or television stations. A major deal would break a four-year period in which consolidation stopped, and a number of the biggest companies — like Gannett and McClatchy — have disposed of some of their newspapers.
Asked by TVNewsCheck.com about the sales prospectus, a PR representative for Freedom said:
“Freedom has always been regularly approached regarding strategic opportunities. This is a normal part of business and, as expected, has continued following the company’s successful restructuring. It is the company’s fiduciary responsibility to review and evaluate these opportunities as they arise.”
Of course, putting media properties up for sale and actually selling them are two different things. The Boston Globe, the newspaper holdings of Landmark Communications, and the Austin American-Statesman were all pulled off the market in 2008 and 2009 when owners ended up dissatisfied with the bids they received.
Still, the Freedom offer will be worth watching both as a potential indicator of a thawing acquisition climate and for further clues on why the bargain-hunting private equity crowd likes newspapers so much when few other investors do.