SANTA ANA, Calif. — Freedom Communications, the bankrupt owner of the Orange County Register and The Press-Enterprise of Riverside, has decided to sell to Digital First Media after a judge blocked a higher bid by the owner of the Los Angeles Times, a Freedom attorney said Saturday.
Freedom will ask a federal bankruptcy judge on Monday to confirm and approve the sale to Digital First, which owns the Los Angeles Daily News and eight other daily papers in the greater Los Angeles area. The deal will close by March 31, Freedom attorney William Lobel said in an email.
Digital First was the runner-up bidder for Freedom at $45.5 million.
The prospective takeover of the Freedom properties is Digital First’s second major move in California in the last three weeks. The Denver-based company earlier announced that it would consolidate six daily newspapers in the San Francisco Bay Area into two, one serving Oakland and the East Bay and the other Silicon Valley. In the East Bay, The Contra Costa Times, Oakland Tribune, The Daily Review and The Argus will become the new East Bay Times. The San Jose Mercury News and the San Mateo County Times will become the Mercury News.
A federal judge had on Friday granted a temporary restraining order blocking Tribune Publishing Co.’s winning $56 million offer.
The move late Friday from U.S. District Judge Andre Birotte Jr. came a day after the U.S. Department of Justice requested the restraining order in an antitrust lawsuit against the purchase by the owner of the Los Angeles Times, the dominant newspaper in the region.
The government said that if the deal went through, Southern California consumers and advertisers would be harmed because Tribune would have a virtual monopoly by owning the four largest papers in four counties. In addition to the Times, Tribune owns The San Diego Union-Tribune.
Tribune had warned in court filings that the temporary restraining order would doom the merger.
The bankruptcy must close by March 31, when temporary private financing keeping the two newspapers afloat will dry up.
In its Friday objections to the restraining order, Tribune complained that the government was relying on “severely outdated” notions of the media market in the era of digital publication. It also criticized the Justice Department’s “eleventh-hour” interest in the deal, given that the media conglomerate was open about its interest as bankruptcy proceedings unfolded.
The Justice Department fired back in court papers late Friday, saying that 200,000 residents of Orange and Riverside counties buy daily newspapers despite the advent of digital publications and the additional cash the higher bid would provide for creditors does not justify the loss of media competition.
“The government’s request, if granted by this court, effectively removes Tribune altogether from the proceedings in the Bankruptcy Court,” Tribune had said, according to the papers filed in U.S. District Court in Los Angeles. “A temporary restraint on Tribune will ensure that it will not acquire the properties.”
A Tribune spokesman said the company was reviewing its options after the restraining order and declined to comment further on Saturday.
Tribune had announced Thursday that it had prevailed in the bankruptcy auction, but the Justice Department the same day moved to prevent the sale, saying it would give Tribune a monopoly over newspaper sales in the region.
In issuing the order, Birotte said that many online websites don’t produce original content, but “primarily post links to stories on the websites of other content generators —including local newspapers like the Register or the Press-Enterprise.”
Had the Tribune sale gone ahead, Tribune would have controlled 98 percent of daily English-language newspaper sales in Orange County and 81 percent in Riverside County, the Justice Department estimated. The four papers Tribune would have controlled have nearly 1,000 journalists covering an area that stretches from Los Angeles to the Mexican border. It’s a region of 18 million people.
Freedom Communications filed for bankruptcy protection in November. It followed a series of layoffs and buyouts after an aggressive expansion of print journalism that included starting daily papers in Los Angeles and Long Beach and buying the Press-Enterprise for $27 million. Both new papers went under.
The Associated Press is among the creditors in Freedom’s bankruptcy proceedings.
Information for this article was contributed by Andrew Dalton of The Associated Press.