The Orange Country Register's parent company, Freedom Communications, has been acquired by a Massachusetts investment group.
Last week, an investor group called 2100 Trust LLC announced that it was acquiring the remaining assets of Freedom Communications, consisting of the Orange Country Register and six other papers, the largest of which is the Colorado Springs Gazette. The terms of the deal haven't been disclosed, but I took a stab at figuring out how much greeting-card mogul Aaron Kushner and his team of investors at 2100 Trust are bringing to the transaction.
My number is $156 million.
I also broke down the financing, which on its face doesn't look all that risky.
But there are some wrinkles to this deal.
First, the LA Times reported, based on unnamed sources at the O.C. Register, that Kushner and his investors plan to "spin off" the six smaller papers. They intend to use the proceeds from these sales to finance the OCR purchase. By my math, assuming no premiums — extra cash — added to the deals, 2100 Trust could garner $44.5 million from these sales. That would get them more than halfway to buying the OCR, which I have priced at about $111 million, including a $40-million premium — a "Manchester premium," given that Doug Manchester probably overpaid by at least that much to buy the San Diego U-T.
But Kushner still has to sell these papers — which he hasn't officially bought yet.
In other words, the "financing" on the OCR purchase is slated to come from future deals. It's possible that Kushner is brokering these deals right now, even as he's buying the papers he plans to sell. The Freedom acquisition won't close for several weeks, so it's very difficult to figure out what's going on right now. No one is talking. Numerous calls to Dirks, Van Essen & Murray, the New Mexico newspaper broker that sources with knowledge of the Freedom deal said had arranged the sale to 2100 Trust, were not returned.
Second, there's the matter of a possible $100-million unfunded retirement liability that Kushner may have inherited from Freedom. This was evidently a dealbreaker for Manchester's effort to buy the OCR, as the U-T reported earlier this month:
U-T San Diego had been interested in acquiring the Register, but last week CEO John T. Lynch sent a memo to U-T managers saying that after nearly six months of negotiations, talks had been terminated.
Freedom has a retirement plan, that is 60% underfunded Close to $100m. The buyer is assuming the full retirement
[R]etirement is past liability it has been discontinued, still owed to employees. Must bring current or pay high fee to continue.