Media General Slate Dealt New Blow In Proxy Fight With Harbinger

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By: Mark Fitzgerald

A second independent proxy advisory firm on Tuesday recommended seating representatives of the dissident shareholder Harbinger Capital Partners on the board of Tampa Tribune publisher Media General Inc.

RiskMetric Group’s Institutional Shareholder Services (ISS) unit recommended a vote for two of the three Harbinger candidates, Daniel Sullivan and Jack Liebau Jr. ISS recommended withholding a vote for Eugene I. Davis, on the grounds that he is “over-boarded by ISS standards,” echoing a charge by Media General that Davis serves on 12 corporate boards of directors.

ISS recommended shareholders not vote for the three Class A directors up for re-election at its annual meeting next week: Charles A. Davis, Rodney A. Smolla, and Walter E. Williams.

On Monday, another proxy advisor, Glass Lewis, also urged shareholders to withhold votes for the three Media General nominees.

ISS said the two Harbinger nominees would provide “needed management oversight” and “would be beneficial to the board.”

ISS also implicitly rejected Media General’s argument the Sullivan and Liebau have no business experience that would be useful to the media company. The proxy firm said Sullivan “has extensive related industry experience, having managed, owned or operated over 60 different television stations in the past 20 years.” Liebau’s “equity research experience covering the media and entertainment sectors provides him with an understanding of key industry drivers and market valuation of the company,” ISS said.

As for the Media General incumbents, ISS said two of them, Charles Davis and Williams, “have been part of the board during an extended period of below par performance.”

Media General has “consistently underperformed its peers,” ISS said.

Media General said it was pleased by the recommendation to withhold votes for Eugene Davis, but “disappointed … RiskMetrics has failed to recognize the clear superiority of the Media General directors up for reelection this year … and has instead recommended two candidates with questionable qualifications backed by a short-term-focused hedge fund whose ‘prescription’ for Media General shows a clear lack of understanding of both our industry and the company.”

Media General is locked in a proxy war with Harbinger, which has amassed an 18.2% stake in the Richmond, Va.-based publisher and broadcast TV owner. Harbinger argues that Media General stock has fallen precipitously because it has not controlled costs, paid too much for a cluster of TV stations, and has squandered capital buying online properties.

Media General — whose dual-class structure ensures continued family management control, whatever the outcome of the directors election — says it takes a long-term view and that even troubled markets such as Tampa Bay, Florida, will return to prosperity. Monday, Media General’s Florida unit announced it would offer buyouts to about half of the 1,326 employees who work for the Tampa Tribune and its related media properties.

“As we pointed out yesterday in our most recent letter to all Media General stockholders, Harbinger’s ‘prescription’ for Media General in our view betrays a trader mentality that is antithetical to long-term value creation,” Media General said in a statement.

Media General said it was “primarily the current severe recession in Tampa, our largest market, and not anything our directors did or failed to do, that accounts for any underperformance of Media General versus some of our industry peers over the past two years.”

Media General (NYSE: MEG) was trading at $14.13 at the noon hour, off 35 cents, or 2.42%, from the open. The stock has traded in a 52-week range of $13.79 to $39.50.

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