Change of plans: Freedom papers going to Digital First*

oc-register-bldg.jpgOC Register building.

*Monday morning update: Bankruptcy judge approves sale to Digital First Media

The government's antitrust concerns about Tribune Publishing owning nearly all the big daily newspapers in Southern California looks like a fatal blow to Chicago's dream of a news goliath with the Los Angeles Times at the center. After federal judge Andre Birotte Jr. issued a temporary restraining order Friday blocking the sale of bankrupt Freedom Communications to Tribune, which bid $56 million, Freedom decided over the weekend to accept the lower $52 million bid from Digital First Media.

If it goes through, this sale would put the Orange County Register and the Riverside Press-Enterprise in the same corporate hands as the Los Angeles Daily News, San Bernardino Sun and several smaller Los Angeles News Group papers. Which I guess preserves a semblance of competition in the SoCal newspaper market, but the Digital First Media papers locally aren't exactly models of fiscal health. On content, if you think the Los Angeles Times has been cut into the bone over the past decade-plus in Tribune hands (and it has), the Digital First Media papers locally are shadows of their former selves with reporters who do their best but very unsatisfying websites. On the business side, however, the Los Angeles News Group papers do give print advertisers another option.

After Tribune Publishing made the high bid last week, the U.S. Justice Department made good on its threat and filed a civil lawsuit to stop Tribune from acquiring the Register and Press-Enterprise on antitrust grounds. Tribune argued the concerns of a monopoly were outdated in the digital news era, but the government won its temporary restraining order. That's when Freedom decided to move on a sale to the next higher bidder with a bankruptcy court hearing scheduled for Monday and a deadline of March 31 looming to close the deal and avoid a shutdown of the papers.

“It may be that Tribune will lose the opportunity to acquire the Register and Press-Enterprise in favor of the second place bidder,” Birotte wrote. “However, this private harm does not outweigh the public interest in the preservation of competition, especially given the government’s likelihood of success on the merits.”

From Tribune Publishing spokeswoman Hillary Manning: “We believe the Antitrust Division continues to overlook the commercial realities of modern media in which Internet-delivered services are aggressively competing with the newspaper industry. The practical effect of the order will be to force Freedom’s newspapers into the hands of an alternative bidder that will be less able to reduce cost and achieve efficiencies, with the likely effect that the journalism serving the local communities will be diminished.”

The Register and the Riverside paper it had just recently acquired are in jeopardy because Freedom sunk into bankruptcy following the Aaron Kushner ownership and happy talk debacle.

News industry analyst Ken Doctor says "all attention now turns to Monday’s bankruptcy court hearing," and in a Nieman Lab piece over the weekend he marvels at how it all got to this point.

It’s hard to believe I’ve been covering the Southern California newspaper meltdown for at least seven years now. Sam Zell, who had taken control of the Tribune Company in an investing coup (which curiously foreshadowed Michael Ferro’s similar seizure of Tribune control this January), took Tribune into bankruptcy in December 2008. It was to be the five-year bankruptcy from hell, a classic among the more than a dozen daily newspaper companies we saw post-recession. Given the current straits of newspaper financials, we may soon see that set of bankruptcies as a mere prologue.

As Southern California, a region of more than 18 million people, moves toward one kind of newspaper consolidation or another, we can see it as a ground zero of the mess daily newspapering has become. Freedom Communications now emerges from bankruptcy for the second time; the Tribune and its L.A. Times have been through one round, as has Digital First Media. Everyone involved in this week’s circus can call itself bankruptcy-experienced. Further, we’ve witnessed a remarkable cascade of characters involved in the L.A. tragicomedies. Consider the larger-than-life characters traipsing through the newspaper landscape. One-time Freedom CEO Aaron Kushner reprised a Music Man role in his entertaining flameout. Tribune contributed not only Zell, but then, in rapid fire-order, CEO Jack Griffin, who just found himself executed in the Michael Ferro coup — with Ferro’s swaggering tenure itself promising more larger-than-life drama ahead. And we can’t forget what looked briefly like the dawning of a would-be golden age of newspaper re-engagement, led by L.A. Times publisher Austin Beutner, until he, too, succumbed to internal politics.

Everyone is shell-shocked. Count among them the remaining newspaper staffers, the communities that have seen great whipsawing and greater reduction of coverage, and the individual readers. As in many cities, the civic-minded readers try to hold on, keeping their subscriptions up, much as they decry the constant decline in the kind, excellence and volume of the news they get, in print or on their phones.

From AP via the Chicago Tribune:

Freedom will ask a federal bankruptcy judge on Monday to confirm and approve the sale to Digital First, which owns the Los Angeles Daily News and eight other daily papers in the greater Los Angeles area. The deal will close by March 31, Freedom attorney William Lobel said in an email....

The prospective takeover of the Freedom properties is Digital First's second major move in California in the last three weeks. The Denver-based company earlier announced it would consolidate six daily newspapers in the San Francisco Bay Area into two, one serving Oakland and the East Bay and the other Silicon Valley. In the East Bay, The Contra Costa Times, Oakland Tribune, The Daily Review and The Argus will become the new East Bay Times. The San Jose Mercury News and the San Mateo County Times will become the Mercury News.

How the Register covered it:

Attorneys for The Orange County Register’s owner filed a motion Saturday asking a bankruptcy judge to approve the company’s sale to Digital First Media, the second-highest bidder in last week’s newspaper auction.

The $56 million bid by Tribune Publishing, owner of the Los Angeles Times, can’t be accepted because an eleventh-hour antitrust court order prevents the company from closing the deal on time, Freedom Communications lawyer William Lobel said.

“We’re going to go in and ask the judge on Monday to approve (Digital First Media) as the successful bidder,” Lobel said.

Digital First Media is the nation’s second-largest newspaper company by circulation, with 65 daily and Sunday newspapers and at least 265 websites in 18 states. The company owns the Long Beach Press-Telegram, Los Angeles Daily News and seven other Southern California newspapers.

Freedom’s request will be considered at Monday’s 9 a.m. hearing before U.S. Bankruptcy Judge Mark Wallace in Santa Ana.

From the LA Times story:

Freedom Communications has now chosen Digital First Media to buy its two newspapers because it no longer believes Tribune Publishing can close the deal, an attorney for the bankrupt company said.

The Los Angeles Times owner had been the top bidder, but its $56-million cash offer to buy the Orange County Register and Riverside Press-Enterprise hit a roadblock late Friday when a U.S. District Court judge approved a temporary restraining order to stop the sale.

With time running out -- Freedom's financing ends March 31 -- the company said it instead plans to sell its assets to Digital First Media, which owns the Los Angeles Daily News and eight other Southern California papers. It bid $52.3 million.

“It’s hard to imagine the Tribune has any ability whatsoever to close the transaction” by that deadline, Freedom attorney Alan Friedman said. Freedom’s lender, Silver Point Capital, hasn’t indicated any willingness to extend the March 31 date.

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