The Orange County Register building in Santa Ana. File photo
The Orange County Register building in Santa Ana. File photo

 

A federal bankruptcy court judge Monday approved a $52.3 million bid for Digital First Media, parent company of the Los Angeles Daily News, to acquire Freedom Communications Inc., owner of the Orange County Register and the Riverside-based Press-Enterprise.

Tribune Publishing Co., owner of the Los Angeles Times, put in the highest bid last week, but was blocked by a temporary restraining order issued late Friday by a federal judge in an antitrust lawsuit filed by the U.S. Department of Justice.

U.S. District Judge Mark S. Wallace, who approved the purchase to Digital First Media, explained that contract law allowed for Freedom to opt out of the deal with Tribune and accept the second offer because there was a question whether Tribune would be able to complete the acquisition in the face of the monopoly challenge.

Attorneys made it clear that the deal with Digital First Media — which was due to run out of financing on March 31 — couldn’t wait for legal proceedings with Tribune to play out.

U.S. District Judge Andre Birotte Jr., in issuing the TRO, had scheduled a hearing for March 28 to decide whether to block the sale beyond that date.

“Tribune Publishing is very disappointed that the antitrust division of the U.S. Department of Justice, at the 11th hour, sought and obtained a retraining order which blocked Tribune from acquiring the debtors’ assets after it was selected as having the highest and best bid at Wednesday’s auction,” said attorney Jeremy Rosenthal, representing Tribune.

Rosenthal said federal prosecutors made a “tactical” decision to “force an emergency decision.” He said Tribune’s interest in acquiring Freedom’s assets had been known “since the beginning of these cases.”

The Justice Department’s argument that Tribune’s successful bid would create a newspaper monopoly in Orange and Riverside counties is “antiquated and unrealistic,” Rosenthal said.

“It wasn’t competition from the Los Angeles Times that caused Freedom to fail,” Rosenthal said. “The entire newspaper industry is under existential threat from electronic media.”

Freedom attorney William Lobel told reporters after the hearing that the Justice Department maneuver ended up costing creditors at least $1.5 million.

Lobel said federal prosecutors could have warned of a lawsuit, and filed one, months ago when Tribune announced its intentions. He speculated that federal prosecutors made the late-inning move to block the merger while also not having to take the risk of going to trial and establishing legal precedence.

“I’m happy it’s done,” Lobel said. “But I wish it would have brought us the extra $1.5 million plus. But it couldn’t be avoided.”

Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division Monday praised Birotte’s ruling that triggered Monday’s outcome.

“Many Americans depend on local newspapers even in this age of electronic information. As Judge Birotte held in his well-reasoned opinion, newspapers play an important role in our democracy,” Baer said.

“Preventing the Los Angeles Times from combining with the Register and the Press-Enterprise will ensure that citizens and advertisers in Southern California continue to benefit from competition and from a diversity of views in their local news coverage,” he said. “The Antitrust Division will remain vigilant in protecting competition in this important industry.”

According to the government’s complaint, filed in Los Angeles federal court, The Times and the Register together account for 98 percent of newspaper sales in Orange County and the Los Angeles Times and Freedom’s newspapers together account for 81 percent of English-language newspaper sales in Riverside County. The Tribune Co. also owns the San Diego Union-Tribune.

Tribune’s acquisition of its most significant competitor would give it a monopoly over newspaper sales in each county and allow it to increase subscription prices, raise advertising rates and invest less to maintain the quality of its newspapers, the government argued.

The Justice Department did not have the same antitrust concerns abou Digital First Media, though it already owned nine newspapers in Southern California, including the Los Angeles Daily News, Long Beach Press-Telegram, Daily Breeze in Torrance and the Pasadena Star-News.

Soon after winning the Freedom bid, Digital First Media announced a name change — from the Los Angeles News Group to the Southern California News Group.

“Our deep affection for local news was the motivation for pursuing the Orange County Register and the Riverside Press-Enterprise. We understand how to make local news both meaningful and profitable,” said Sharon Ryan, Digital First Media’s executive vice president for the Western Region.

Ron Hasse will continue as president and publisher of the newspaper group.

“We are honored to uphold the values of local journalism, and we look forward to working with award-winning news teams who have dedicated their careers to informing the public about the issues that matter most,” Hasse said. “We are also excited about providing advertisers a broader platform from which to deliver their messages.”

Digital First Media now owns 11 Southern California daily newspapers and more than a dozen community weeklies, putting it among the top five nationwide in Sunday circulation and among the top six in daily circulation, according to the company.

—City News Service

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