Media General shareholders elect new directors

BY JOHN REID BLACKWELL
Times-Dispatch Staff Writer
Published: April 24, 2008

Three new directors were elected to Media General Inc.’s nine-member board yesterday, giving a victory to an activist investment firm seeking changes at the Richmond-based company.
Whether the dissident shareholder, hedge fund Harbinger Capital Partners, can translate its win into changes remains to be seen.
Media General Chairman J. Stewart Bryan III and company President and Chief Executive Marshall N. Morton said they would work with the three new board members, but neither indicated any willingness to acquiesce to Harbinger’s prescriptions for improving shareholder value.
“We are certainly going to continue on a course that we think is best for the company,” Bryan said after the annual shareholders meeting.
During the meeting, Joseph W. Cleverdon, Harbinger’s vice president and director of investments, told stockholders, “We’re looking forward to getting past the proxy process and move on with rebuilding shareholder value.”
Media General, which owns WSLS and the Richmond Times-Dispatch, did not release a tally of the votes for the three board members elected by Class A shareholders.
Harbinger released a statement after the meeting saying its candidates received between 57 percent and 68 percent of the total votes cast, according to preliminary tabulations.
The Harbinger nominees elected to the board were:
Eugene I. Davis, 51, of Livingston, N.J., the chairman and chief executive officer of Pirinate Consulting Group LLC, a privately owned consulting firm;
F. Jack Liebau Jr., 44, president of Liebau Asset Management Co. of Pasadena, Calif., and
J. Daniel Sullivan, 56, of Brentwood, Tenn., a former broadcasting executive.
The three new board members declined to comment. They attended their first board meeting after the shareholders gathering, held at The Times-Dispatch’s production plant in Hanover County.
Bryan and his family control the company’s Class B shares, which elect 70 percent of the board of directors, or
six of the current nine directors. Those incumbent board members were re-elected yesterday.
The corporate structure means the Harbinger directors will not have a majority on the board, but it does give them a forum to get their message across, analysts said.
“It should be an interesting year going forward, because now you are going to have two distinct views, if not differing views, on the direction that Media General should take,” said Steve Marascia, an analyst at Anderson & Strudwick in Richmond who follows Media General. “It is going to be incumbent upon both parties to work together for the good of the shareholders.”
The new directors “will have a seat at the table and can voice their opinion and give their ideas, and knowing the Media General management — these are reasonable people — they will listen,” said Edward J. Atorino, an analyst at The Benchmark Co. who follows Media General.
“If these guys come up with some ideas that Media General management never thought of, I am sure they will give it some consideration.”
Harbinger has recommended, among other things, that the company cut costs more aggressively and sell what the hedge fund has called non-core assets, such as some of its Internet properties. It also said Media General should consider alternatives — including the possible sale of newspaper and broadcast properties in Florida, which have been hard hit by a economic downturn there.
After the meeting, Bryan said Harbinger’s proposals “all appear to be short-term solutions that don’t make much sense. But maybe they have some knowledge that we haven’t heard yet.”
Like many other media companies, Media General’s stock price has fallen as it struggles with declines in advertising revenue, the result of a slowing economy and a migration of advertisers away from traditional print and broadcast media to the Internet.
Bryan acknowledged shareholder dissatisfaction with the stock’s decline at yesterday’s meeting, but he and Morton stressed that Media General is taking steps to improve its results, including cutting costs and debt, investing in new, niche publications and online businesses, and pushing a “Web-first” strategy at its newspapers and TV stations.
Neither Morton nor Bryan expressed surprise at the outcome of the election.
Last week, investor Mario J. Gabelli, the company’s largest Class A shareholder, said he would support the dissident slate. Gabelli, who heads Gamco Investors Inc., is a long-time Media General stockholder but a frequent critic of the company’s business decisions.
Gabelli did not return a call seeking comment yesterday. But Josh Fenton, who heads Gamco’s proxy voting committee, said the firm had no specific recommendations for changes at Media General at this time.
“We voted for change, and we weren’t alone, and we are waiting to see what happens,” Fenton said.
The incumbent directors who were not re-elected by the Class A shareholders were Rodney A. Smolla, dean of the Washington and Lee University School of Law; Walter E. Williams, an economics professor and former chairman of George Mason University’s economics department; and Charles A. Davis, chief executive officer of Stone Point Capital LLC, a private-equity firm based in Greenwich, Conn.
Media General owns three metropolitan newspapers, 22 daily community newspapers, 23 network-affiliated television stations and affiliated Web sites, mostly in the Southeast.