Media General Wins One In Battle of Proxy Advisors

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By: Mark Fitzgerald

On the same day Media General Inc.’s second-largest shareholder endorsed a dissident slate for its board of directors, a major proxy advisory firm Wednesday endorsed management’s nominees.

In an 11-page report, Proxy Governance criticized Media General’s financial and stock performances, and suggested its executives are overpaid compared with similarly sized newspaper companies. But it concluded that Harbinger Capital Partners Master Fund Inc., the dissident shareholder nominating three representatives for election to the board of directors next week, suffers from “a similar strategic myopia” as family-controlled Media General.

“While we believe the dissident critique has certain merits, we have significant questions whether the dissident slate, including one
heavily overboarded nominee, would have sufficient time or experience to effect change without significant and counterproductive
disruption,” Proxy Governance said in its conclusion.

Separately Tuesday, Mario J. Gabelli, who with his affiliates owns 21.2% of Media General’s publicly traded Class A stock, said he would vote for the Harbinger. Gabelli has been critical of Media General’s purchase two years ago of four NBC affiliate television stations, and voted to withhold votes from management nominees at last year’s annual meeting.

Harbinger, which holds an 18.7% stake in Media General, says it started the proxy battle to seat three of its representatives because the Richmond, Va.-based newspaper publisher and broadcaster has taken on too much debt for poorly chosen acquisitions. It argues that Media General should exit the troubled Tampa Bay market, where the company owns The Tampa Tribune and a leading TV station; cut its dividend; create more broadcast duopolies; sell off recently acquired social network online sites; and impose stricter costs controls.

Media General argues that the Harbinger slate are inexperienced individuals with a has a short-sighted view of the media industry, and no real solution to the economic problems of newspapers.

Proxy Governance sided with Media General in its evaluation of the dissident slate — but found considerable merit in Harbinger’s proposals.

“If there is a compelling problem which needs to be addressed by shaking up the board, the dissidents have yet to articulate how this group of nominees is suited for the challenge,” Proxy Governance said.

“The relatively weak slate is unfortunate, because the better-honed elements of the dissident’s critique would likely benefit the company’s shareholders, and could use an effective champion in the boardroom,” it added. “In particular, we note the company’s apparent reluctance to exploit duopolies, the restrictive effect of the dividend policy on the company’s ability to deleverage, the purchase of entire Internet companies rather than the content they provide, and the inability to fully realize the value of some Internet properties without a national brand presence.”

Proxy Governance said the only Harbinger nominee with sufficient media experience, Charles Davis, is “profoundly overboarded,” meaning he serves, in its view, on too many other boards of directors.

In recent days, two other proxy advisory firms, RiskMetrics and Glass Lewis, recommended shareholder withhold votes for the management nominees. RiskMetrics recommended votes for two of the three dissident nominees.

Media General has a dual-class stock structure, which allows the Bryan family and other insiders to control 70% of the directors seats through ownership of Class B stock.

With less than an hour of trading left Wednesday afternoon, Media General (NYSE: MEG) was trading at $14.29, up 47 cents, or 1.93%


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