O.C. Register Owners Decide Not to Sell Firm

Ending weeks of speculation, the family that owns Orange County Register parent Freedom Communications Inc. decided Sunday against selling the company but agreed to transfer ownership to the fourth generation of shareholders, now in their 20s and 30s.

The decision was largely a compromise by the family, which was under pressure from dissident third-generation shareholder Tim Hoiles to liquidate his 8.6% stake. Hoiles, the 50-year-old grandson of founder R.C. Hoiles, had threatened to sue his relatives if his demands to be bought out at a favorable price weren’t met.

Tom Bassett, a tax attorney and fourth-generation Hoiles who proposed the stock transfer idea, said it would be six to 18 months before any transaction took place.

Experts said that to raise funds to buy out the third-generation shareholders, the family could sell some shares to the public or in the private equity market, or put part of the Irvine-based media company up for sale.

Bassett, 38, said the proposal to transfer shares should satisfy those family members who want to cash out.

“People who want liquidity can and will get bought out, while [Freedom] will remain a privately held media company,” he said.

On Sunday, at the conclusion of a two-day family meeting, Hoiles declined to say whether he agreed with the share transfer decision or whether he would pursue a lawsuit. “We’ll have to see,” he said after emerging from a Costa Mesa hotel conference room.

For now, younger shareholders will work with financial advisor and family-business expert Francois De Visscher to devise the best course. A conference call has been scheduled with him for Wednesday.

In the meantime, the family’s proposal is to be presented Tuesday to the company’s board, which includes Hoiles and five other shareholding family members, six non-shareholding outside directors and Chief Executive Samuel Wolgemuth. Freedom owns 28 daily newspapers, 37 weeklies and eight television stations.

The Register, the crown jewel of the Hoileses’ holdings, is a standard-bearer of libertarianism and the dominant newspaper in one of the country’s most politically conservative counties.

The closely held company last year had revenue of $760 million and lost about $109 million amid the nationwide advertising downturn and softening economy, said sources familiar with the results. The business also reportedly wrote off $103 million for magazine, Internet and other losses.

The Hoiles family was under pressure to hold a meeting about restructuring after talks to buy out Tim Hoiles faltered, and the maverick shareholder went to the media to publicize his discontent with the company’s performance and his inability to cash out. His threat to sue his relatives ratcheted up the heat.

Tim Hoiles, who maintains that the company has lost 25% of its value in the last five years because of mismanagement, said an outright sale of the company would fetch far more than any other option. Independent analysts have valued the company at $1.5 billion to $2 billion.

Hoiles said that earlier this year he demanded as little as $75.2 million to sell his stake, but a deal failed to materialize.

He said that other family members also want to liquidate some or all of their holdings and had grown unhappy with their lack of options.

By Sunday, the family rejected a proposal to sell the company because such a step probably would cost the family control of its businesses, eliminate potential employment opportunities for family members, end the libertarian bent of Freedom’s media holdings and potentially have “a negative impact on the continuation of various family relationships,” according to an internal Freedom document.

Joseph M. Alioto, a member of Tim Hoiles’ high-profile team of legal and media advisors, recently said his client “would not allow shareholders to keep him hostage and prisoner against his will.”

Alioto disputed the claims that shareholders had reached a final decision about the company’s future.

He said that of the 13 alternatives examined at the weekend meeting, selling the company received the second-most votes. That option would be pursued if a buyout by the fourth generation could not be completed, he said.

Kirk Hardie, 26, said members of the fourth generation are closer and more cohesive than their elders, but just as politically committed. “We want to maintain the legacy our great-grandfather started by promoting the libertarian philosophy in our communities,” he said.

Under R.C. Hoiles, the company’s flagship Orange County Register became a bully pulpit for libertarian and right-wing causes, helping to launch grass-roots political efforts that helped fuel the presidential bids of such conservative icons as Barry Goldwater and Ronald Reagan. The paper, which toned down the ideological fire and brimstone after the elder Hoiles’ death in 1970, has since won three Pulitzer Prizes. With a daily circulation of about 315,000, it now ranks as the nation’s 12th biggest newspaper.

There are an estimated 30 fourth-generation Hoileses and 15 third-generation members, mostly in their 50s.

That the 43 Hoiles shareholders who participated in this weekend’s meeting came to a decision was a surprise. Initially, they were expected to winnow down the list to three or four options and forward them to the board for further exploration.

“I’m happy with the outcome,” said Robin Hardie, a 32-year-old shareholder.