Tribune's Court Hurdle on Papers Spurs Freedom to Pick New Buyer

  • Digital First emerges as top choice for bankrupt publisher
  • Original deal seen faltering after U.S. antitrust setback

Tribune Publishing Co. hit a court roadblock in its bid to acquire bankrupt California newspaper publisher Freedom Communications Inc., which now plans to turn to the next-highest bidder and its $52 million offer.

Freedom will notify a bankruptcy judge about the pivot to Digital First Media Inc., publisher of the Los Angeles Daily News and Oakland Tribune, said William Lobel, Freedom’s lawyer. Freedom, owner of two newspapers in the region, faces a March 31 deadline from lenders to repay $21 million, and doesn’t expect Tribune’s U.S. antitrust case to be resolved by then, Lobel said Saturday in an interview.

U.S. District Judge Andre Birotte Jr. in Los Angeles on Friday issued a temporary restraining order after the U.S. government sued to prevent the deal between Freedom and Tribune, the publisher of the Los Angeles Times. The Justice Department said this week that Tribune would dominate newspaper sales in two counties, allowing it to increase subscription costs and raise advertising rates.

The U.S. government “has established a likelihood of success” in the case, the judge said while ordering further legal argument before deciding whether to permanently halt the transaction. The U.S. said Tribune’s acquisition of Freedom’s Orange County Register and Riverside Press-Enterprise would more than double its control of English-language daily newspaper circulation to 98 percent in Orange County and provide an almost sevenfold boost to 81 percent in Riverside County.

‘A Threat’

“Such a concentration clearly constitutes a threat to competition and would likely have adverse effects on consumers in the market as a whole,” Birotte wrote in an 11-page order.

Tribune, which won a bankruptcy auction for Freedom with a bid of $56 million, has said it will fight the antitrust case. The Justice Department is “living in a time capsule, with a framework that predates the arrival of iPhones, Google, Facebook, and modern media outlets that are killing the traditional newspaper industry,” the company said this week.

Dana Meyer, a Tribune spokeswoman, didn’t immediately return a call and e-mail seeking comment on the ruling after regular business hours. Justice Department spokesman Mark Abueg declined to comment.

Struggling with declining circulation and ad revenue, Tribune is trying to find a successful business model in the digital age. Its flagship newspaper, the Chicago Tribune, is implementing a metered paywall, meaning readers could access as many as 10 articles a month online before being asked to pay for a subscription.

Tribune also operates the San Diego Union-Tribune. Digital First owns more than 30 newspapers throughout California.

Pay Cash

Tribune has agreed to pay cash for Freedom’s assets through subsidiary Orange County Media LLC, according to an earlier statement from the Chicago-based company, which outbid Digital First, which also owns the Denver Post, and a Freedom management group. A hearing in the bankruptcy case is scheduled for March 21, when Lobel said Freedom would report on its switch to Digital First. Tribune has said its financing for Freedom runs out on March 31.

Birotte said in his ruling that local newspapers, as opposed to news-aggregation websites like Google News, “continue to serve a unique function in the marketplace: they are the creators of local content.”

The case is U.S. v. Tribune Publishing Co., 16-cv-01822, U.S. District Court, Central District of California (Los Angeles).

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