Freedom Communications Holdings, the parent company of the Orange County Register, has been acquired by a subsidiary of 2100 Trust LLC, a private investment firm based in Masachusetts and led by 39-year-old Aaron Kushner, who has previously attempted to buy the Boston Globe from the New York Times Co. and last year sought to purchase a newspaper company in Maine.
The deal size hasn't yet been disclosed, nor has any detail been released on the financing. The deal is scheduled to close in 30 days and caps a sell-off of media properties in Texas and the Midwest that Freedom has been engaged in for the past few months. Earlier in 2012, Freedom sold papers in Florida, New Mexico, and North Carolina. The O.C. Register is the nation's 19th largest newspaper, and it's recently seen an uptick in its circulation.
Sources with knowledge of the deal said that no major investment bank was involved with the sale, but that Freedom was advised on the transaction by Dirks, Van Essen & Murray, a New Mexico law firm that specializes in newspaper M&A.
Kushner is a serial entrepreneur who most recently presided over a rocky — though by his account successful — reign at a modest greeting card company near Boston, before setting his sights on newspapers.
2100 Trust LLC includes Chris Harte as an investor. Harte was formerly the publisher of the Minneapolis Star Tribune, thrust into that role in 2007 when the publisher he had hired in his capacity as advisor to the private-equity firm Avista Capital Partners was forced out for legal reasons. Avista bought the Star Tribune from McClatchy in 2006 for $530 million. McClatchy had paid $1.2 billion to buy the paper in 1998.
Harte, who was at Knight Ridder before coming to the Star Tribune, is a newspaper scion who went to prep school with George W. Bush. In 2007, the MinnPost reported that he pushed out the Star Trib's editorial page editor, a 14-year veteran of the paper, in a dispute over politics and coverage.
Ultimately, the Star Trib deal turned into one of those private-equity plays gone horribly wrong. Avista started taking mark-to-market writedowns on its investment in 2008, denied rumors that it was considering bankruptcy, but then put the paper in Chapter 11 in 2009. Avista lost pretty much everything (in as much as you can "lose" more than $500 million in borrowed money) while another private-equity firm — distressed-debt specialist Angelo Gordon & Co. — gobbled up the paper.
Harte was also involved in Kushner's failed effort to buy MaineToday Media, which included the Portland Press Herald, a paper that Harte had served as president. That deal collapsed when the investors couldn't come to terms with unions and management, according to published reports. The company wound up being bought by S. Donald Sussman, a philanthropist who purchased a 75-percent equity stake for $3.3 million, making the total deal size roughly $5 million.
Freedom Communications has also endured some time in bankruptcy court, entering Chapter 11 in 2009 and exiting in 2010. (Interestingly, Angelo & Gordon was one of the firms that wound up owning a piece of Freedom when it emerged.) Today's deal with 2100 Trust is the culmination of a gradual sale of assets that began last year when Freedom's eight T.V. stations were sold for $385 million.
The investment team buying the Register along with Freedom's six other papers in California, Colorado, and Arizona also includes Jack Griffin, who was CEO of Time Inc. for less than six months in 2011 and 2012. The New York Times reported that he was ousted due to a "brusque" management style.
The final member of the team, according to the O.C. Register's own report, is Brendan Burns, who is CEO of a printing company, but who used to be a managing director at Stepping Stone Capital Partners, a boutique investment bank with a venture-capital arm (he's still listed as a member of the executive team).
The new owners of Freedom aren't answering questions from the media, but Kushner issued a statement:
"We couldn't be more pleased with the opportunity to lead the hard-working and talented employees of Freedom Communications in serving these communities. We believe that newspapers are essential to the fabric of our lives and are excited to own and grow these unique institutions," he said.
Back in 2011, when his lowball $200-million Boston Globe bid was still alive, Kushner participated in a warts-and-all profile by Boston Magazine's Katherine Ozment in which he disclosed the following:
“Our plan is a very contrarian plan,” he says. “If you want to grow a business, you have to invest in that business; especially when it is at a weak point, you cannot cut your way to growth.”
Ozment then asked about how much editorial influence he might exert:
“I’m not sure why,” he says, speaking forcefully. “I actually think it’s unhealthy. If you don’t care enough about your product to have an opinion of it, why are you even in the business?” When I suggest that most credible newspapers maintain a sacrosanct wall between the business and editorial sides of the paper, his voice carries across the quiet room. “I think the existing editors have fabulous judgment,” he says. “It’s not a question of their judgment or their abilities…. But does that mean that I’m not going to care equally deeply and be very much engaged? Of course [I will]. As will our investors.”
You could look at this investment team and see trouble. A young wannabe media mogul, a private-equity adjunct with one newspaper bankruptcy under his belt and another newspaper deal that went to pieces at the last minute, a media executive who just couldn't get along with Time Inc.'s CEO and has been scrutinized as a failed "change agent" — and in Burns, a former banker who now seems to be involved with sprucing up a printing company located in the Berkshires.
Then again, Freedom has clearly been very interested in getting out of the newspaper business. In the new owners, the company has found some people who clearly want to get in.