Court Approves Orange County Register Sale

By PAUL ANDERSON

SANTA ANA, CA- A federal bankruptcy court judge today 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 couldn't wait for legal proceedings with Tribune to play out.

"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."

Digital First attorney Marshall Anstandig said the company "obviously look(s) forward to operating both" newspapers. "We're delighted with the result here today."

U.S. District Court Judge Andre Birotte Jr. on Friday issued a temporary restraining order and scheduled a hearing for March 28 to decide whether to block the sale beyond that date on concerns that the sale would harm consumers and advertisers.

Tribune said in a court filing that the restraining order would, in effect, shut it out of the sale because a bid must be approved quickly in U.S. Bankruptcy Court. The publishing company said Freedom Communications will run out of financing March 31.

Tribune spokeswoman Hillary Manning previously said 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 costs and achieve efficiencies, with the likely effect that the journalism serving the local communities will be diminished."

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.

"If this acquisition is allowed to proceed, newspaper competition will be eliminated and readers and advertisers in Orange and Riverside counties will suffer," Assistant Attorney General Bill Baer of the DOJ's antitrust division, said earlier. "Newspapers continue to play an important role in the dissemination of news and information to readers and remain an important vehicle for advertisers. The antitrust division is committed to ensuring that competition in this important industry is protected."

Digital First Media already owns nine newspapers in Southern California, including the Los Angeles Daily News, Long Beach Press-Telegram, Daily Breeze in Torrance and the Pasadena Star-News.

City News Service