Media General, dissident weigh in on proxy battle

By JOHN REID BLACKWELL
RICHMOND TIMES-DISPATCH
Published: April 2, 2008

Investors heard from both sides yesterday in a proxy battle between Media General Inc. and a dissident shareholder over the direction of the Richmond-based media company, owner of the Richmond Times-Dispatch and WSLS.

At a private meeting for institutional shareholders in New York City, hedge fund Harbinger Capital Partners laid out its reasons for nominating three candidates to Media General’s board of directors. A representative of the hedge firm argued that the company “has pursued a consistent but consistently flawed strategy” and should focus more on debt reduction, cost-cutting, and eliminating what Harbinger called noncore businesses.

Media General opposes the Harbinger nominees, saying its three incumbent directors are more qualified.

“That is what is at stake today: What is it that Harbinger brings to the table that’s so important that we should unseat three valuable, knowledgeable and committed directors and substitute three Harbinger nominees that frankly, in our view, cannot hold a candle to the current board?” said Marshall N. Morton, Media General’s president and chief executive officer.

Harbinger’s representative at the meeting, Joseph W. Cleverdon, its vice president and director of investments, said its nominees have a depth of experience that the board needs and a knowledge of the publishing and television industries, as well as a history of working with companies in transition.

The meeting was closed to the public and the news media, but Harbinger and Media General filed copies of their presentations with the Securities and Exchange Commission.

About 50 people, plus representatives from both sides, attended the forum, participants said.

Media General’s largest shareholder, Mario J. Gabelli, arranged and moderated the meeting. He reportedly asked a handful of questions and then took 10 questions from the audience.

Edward Atorino, a media industry analyst at the Benchmark Co., said the meeting was a good public-relations move. “By going there, [Media General] management looks like they’re pro-shareholder,” he said.

Gabelli, who sometimes has criticized Media General’s business decisions, said after the meeting that he still favors one of Harbinger’s nominees—F. Jack Liebau Jr.—but he indicated he had not decided how he will vote.

Gabelli is chief investment officer of GAMCO Investors Inc., which holds about 22 percent of the Class A shares of Media General. Harbinger owns or holds voting rights for about 21 percent of the Class A stock.

Media General has a dual-class stock structure that gives most of the voting power to Class B shares, which are controlled mostly by company Chairman J. Stewart Bryan III. The Class B shares elect six of the nine board members.

Cleverdon suggested that Media General should sell some of its newspaper or broadcast operations in Florida that have suffered from an economic downturn and hurt the company’s overall performance.

Morton said the Florida market “has historically been a terrific market for us, and it will be again.”

The firm also criticized Media General’s $600 million acquisition of four NBC television stations in 2006 as too expensive, a claim Gabelli also has leveled. Morton defended the acquisition, saying the stations have contributed significantly to the broadcast division’s revenue.

After the meeting, Morton said he felt Harbinger’s presentation revealed how little the firm knows about Media General’s business.

“It was mostly platitudes, and formulaic, business-school kind of stuff,” said Morton, who has publicly criticized Harbinger for not communicating with Media General.

Shares of Media General rose nearly 14 percent to $15.98 before yesterday’s meeting, one day after the company announced a plan to reduce debt using proceeds from the sale of several television stations and its stake in a newsprint company.

Three directors will be chosen at Media General’s annual meeting April 24.

Harbinger also has put pressure on the New York Times Co., another media company. Harbinger and another investor nominated four candidates for the company’s board of directors. The media company settled the proxy fight last month by agreeing to expand its board from 13 to 15 members and supporting two of the dissident nominees.
Contact John Reid Blackwell at (804) 775-8123 or .

Staff writer Emily C. Dooley contributed to this report.