By: Mark Fitzgerald
Harbinger Capital Partners unwelcome slate of nominees for the board of Media General consists of media veterans, including a former Los Angeles Times reporter.
The nominees’s media experience stands in contrast to the slate Harbinger wants to nominate for The New York Times Co.’s board. At the Times, Harbinger has emphasized its desire to change the direction of the company, but in its Media General proxy and a communication with its chairman, the New York investment firm emphasized it does not seek to change the two-tier stock ownership structure of the Richmond, Va.-based newspaper publisher and television station owner.
“We should point out that we have no interest in altering the company’s dual class share structure,” Harbinger’s Philip A. Falcone wrote Media General President and CEO Marshall N. Morton in a Jan. 30 letter included in the Securities and Exchange Commission (SEC) filing.
“Furthermore, you should know that we have a history of providing long-term support to companies that face serious challenges or are out of favor in the investing community, such as is currently the case with Media General,” Falcone added.
In a press release reacting to Harbinger’s request for directorships, Morton said the firm specializes in short-term investments for quick profits. Media General, publisher of the Tampa Tribune and 24 other dailies, has adamantly opposed Harbinger’s entrance to the board, and vowed to use its dual-class control to stop any attempt at a hostile takeover or to force a sale.
Harbinger is now the second-largest holder of the publicly traded Class A Media General Stock, with an 18.5% stake.
Since beginning to acquire Media General stock (NYSE: MEG) last June, Harbinger has realized quick losses — not profits. Its first shares, bought as passive investors, cost about $33 a share. It bought another big stake in January, paying about $18 per share.
In mid-day trading Monday, Media General was at $14.67 a share, down 26 cents, or 1.74%, from the open, and threatening to set a new 52-week low. It has traded in a range of $14.82 to $41.03.
In its proxy, Harbinger blames board members inexperienced in media for the lagging performance.
“Harbinger believes that the company has lost strategic, operational and geographic focus in recent years and has demonstrated lack of judgment in its capital allocation and growth strategy decisions,” its proxy says.
“For example, Harbinger believes the company overpaid in its acquisition of four NBC affiliate stations in 2006 by buying the stations at a multiple of 2004-2005 combined average broadcast cash flow that has caused the transaction to be dilutive to company earnings,” the proxy adds. “The company simultaneously lost geographic focus in the transaction by acquiring stations located outside its core Southeastern US market.”
The proxy also criticizes Media General’s 2003 investment in NTN Buzztime Inc., an interactive entertainment company Harbinger says has lost 67% of its market value.
“Furthermore, Harbinger believes that the company’s recently acquired online advergaming and online social shopping portal ventures have diverted management’s attention away from the company’s core businesses at a time when management’s online strategy should instead serve to directly magnify the value, content and reach of its core television and newspaper properties and produce meaningful incremental cash flows,” the proxy says.
These are the Harbinger board nominees:
Eugene I. Davis, 53, since 1999 chairman of a consulting group specializing in management turn-around. He is a former COO of Total-Tel USA Communications, a telecommunications provider, and former president and vice-chairman of Emerson Radio Corp.
F. Jack Liebau Jr., 44, president since 2003 of Liebau Asset Management Company, a privately held investment manager for individuals, foundations and corporations. He is a former equity analyst covering media and entertainment industries for Capital Research Co. He was a reporter and assistant to the publisher while at the Los Angeles Times. The proxy notes he once wrote a profile of Media General for Barron’s.
J. Daniel Sullivan, 56, who Harbinger said has “managed, owned or operated over 60 different television stations in the past 20 years.” From 1998 he was president and CEO of Quorum Broadcasting Company, Inc., which he founded in connection with the acquisition of 16 television stations in 10 markets. He is a former president and CEO of Sullivan Broadcasting Company Inc.
The Harbinger proxy follows by about a week Media General management’s proxy.