One of Media General Inc.’s largest shareholders said Wednesday he plans to vote for a slate of directors nominated by a dissident shareholder looking to make changes at the struggling media company.
Mario J. Gabelli, whose investment company holds about 22 percent of the company’s Class A shares, told the newspaper publisher and television station operator of his decision in a letter filed with the Securities and Exchange Commission.
“The question remains as to whether with three new directors, will that create creative tension or destructive tension? Our conclusion is that it is hard to know in advance,” Gabelli wrote in the letter dated Tuesday to Marshall N. Morton, Media General’s president and chief executive.
Media General shares rose 21 cents to $14.23 in morning trading Wednesday.
Harbinger Capital Partners announced plans in January to nominate three directors to the board at the annual meeting next week for the publisher of the Richmond Times-Dispatch, The Tampa Tribune and Winston-Salem Journal. The nominees include former broadcasting executive J. Daniel Sullivan, investment manager F. Jack Liebau Jr. and turnaround consultant Eugene I. Davis.
Harbinger, which holds about 21 percent of the Class A shares, has said it is not looking to change the dual-class stock structure at Media General, which is controlled by the family of its chairman, Stewart Bryan. The family owns most of the company’s Class B shares, which elect 70 percent of Media General’s board.
Harbinger recently had success gaining seats on the board of the New York Times Co., which agreed to add two directors named by Harbinger to its slate of board nominees.
Media General has opposed Harbinger’s actions, and questioned the nominees’ experience and the investment group’s long-term plan to improve profitability at the company which has predicted a wider first-quarter loss and saw profits plummet more than 85 percent to $10.7 million in 2007, from $79 million in 2006.
“Harbinger’s ‘prescription’ for Media General in our view betrays a trader mentality that is antithetical to long-term value creation,” the company said in statement Tuesday after proxy advisory firm RiskMetrics Group recommended shareholders vote for two of Harbinger’s nominees. Advisory group Glass Lewis also suggested on Monday that shareholders vote for one of Harbinger’s directors.
Gabelli said the company ignored his firm’s suggestions that Media General not make any acquisitions, in particular four NBC stations in 2006, and reduce debt to maintain “financial flexibility.”
Phone messages seeking comment from Media General and Harbinger were left but the calls were not immediately returned.
Media General has said that through various asset sales, including television stations, the company should be able to reduce debt by $100 million this year. By the end of 2008, the company expects to have about $770 million in debt outstanding.
In addition to its three metropolitan newspapers, Media General owns 22 daily community newspapers in Virginia, North Carolina, Florida, Alabama and South Carolina, more than 150 weekly newspapers and other publications and 23 network-affiliated television stations.