Hoiles Family Members Close Deal

The family feud that roiled Irvine-based Freedom Communications Inc. for most of the last two decades drew to a close Tuesday as more than half the members of the founding Hoiles clan cashed out their holdings and walked away from the media chain with nearly $1 billion.

Remaining family members still own 60% of the restructured, privately held company and control the libertarian editorial policies of the chain’s newspapers, which include the flagship Orange County Register.

But they now will share power with private-equity investors Blackstone Group and Providence Equity Partners. The investors collectively pumped about $1.3 billion, including nearly $1 billion of borrowed money, into Freedom, owner of 28 daily and 37 weekly newspapers and eight television stations.

Terms of the deal enable the investors to gradually increase their equity stake but guarantee the remaining 40 or so Hoiles family shareholders at least 50.1% of the voting power for the next few years. A number of events could then trigger a turnover in voting control or a public sale of the company if the Hoiles shareholders don’t buy out Providence and Blackstone.

The deal was worked out late last year after decades of bitter infighting between Hoiles family members who wanted to unload their stakes and those who wanted to hold on to the company founded in 1935 by the late Raymond Cyrus Hoiles. By the 1990s, the company’s sluggish performance prompted more frustration in those who wanted to sell but were unable to on the open market.

Dissenting family members forced an auction last year that pitted private investment firms against public media companies such as USA Today publisher Gannett Co.

Blackstone and Providence won with a deal that netted family members $212.71 a share for their Freedom stock. In all, 57.2% of the family’s shares were cashed out by Tuesday.

“It’s a shame to see it end this way,” said David C. Hardie, a third-generation family member and former company director who is among those who sold their holdings.

The investors borrowed a little less than $1 billion and provided about $400 million more in private capital to finance the deal, insiders said.

The buyout proposal was approved by the family shareholders in December, but it took until now to meet various regulatory and financing requirements.

Completion of the buyout Tuesday included retirement of about $300 million of debt.

“This provides an opportunity for ownership to be unified,” Freedom Chief Executive Alan Bell said of the restructuring. Family members who didn’t sell their shares “are people who deliberately chose to stay.... They really want to see the company grow and prosper.”

Bell is the management representative on Freedom’s new 13-seat board of directors. In addition to Bell, the board is composed of four Hoiles family members, four investor representatives and four independent members.

The Hoiles shareholders retained the right to select the board chairman, and a formal election is scheduled for an annual family meeting in August. Until then, Thomas W. Bassett, a fourth-generation Hoiles family member who engineered the buyout plan, will serve as interim chairman.