The deal and the reasons for doing it are plain enough. Tribune Publishing Co. (NYSE: TPUB) will buy Freedom Communications, owner of the Orange County Register. In the process, Tribune will bolster its huge West Coast presence built around the Los Angeles Times and San Diego Union-Tribune. As part of a consolidation, Tribune Publishing likely will save millions of dollars. It was an ideal arrangement until the U.S. Department of Justice decided to block it.

According to private research firm PrivCo:

Earlier today, Tribune Publishing agreed to acquire the assets of Freedom Communications [Private Company Ticker Symbol: FRECOMP], winning the bid at a public bankruptcy auction.  Tribune offered $56 million in cash for the business, which is the owner of the Orange County Register.  Unfortunately for Tribune, however, the U.S. Department of Justice has already filed a civil antitrust lawsuit against the acquisition, claiming that the acquisition would give Tribune, which owns the Los Angeles Times, a monopoly over newspaper sales in the area.

Two other firms also wanted to buy Freedom. One was publisher Media First, and the other a group that supported the Freedom leadership.

What might have been an easy deal, at what appeared to be a good price, could drag on for months. And the Justice Department may prevail. Its argument is that Tribune Publishing will have a newspaper monopoly in southern California, which presumably would give it an advantage to set high ad rates. That theory may be hard to prove. Nevertheless, the suit will cost Tribune Publishing a great deal of money.

Michael Ferro, who paid $44.4 million to buy 5.2 million shares of Tribune Publishing, has met the first major hurdle to his expansion strategy. If he loses Freedom, he will have to find another spectacular act to show other shareholders that his investment is worthwhile for them.

In cases of this sort, the buyer often divests itself of some properties to weaken its chances for a monopoly. Tribune cannot do that. Its strategy is to own the papers in a group to create some set of synergies. What the Justice Department may want, Tribune cannot give.

Tribune Publishing may have to wait months to find out if it can execute its plan.

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