Sun-Times Media Group Fires Back at Hedge Fund's Efforts to Oust Leadership

By: E&P Staff Sun-Times Media Group's board of directors hit back Wednesday at hedge fund Davidson Kempner Capital Management's efforts to oust the company's leadership. In a sharp letter to shareholders, the board wrote that Davidson Kempner's "ill-conceived" efforts have shrouded the company in uncertainty.

The hedge fund and major shareholder in STMG agitated for the board to resign and accept its slate of nominees. Three of STMG's directors agreed to give up their seats, but said earlier this week they were delaying their exit in order to find suitable replacements.

Davidson Kempner ?condemned? the board for its decision in a Jan. 5 release. ?This decision by the current board to further entrench itself, despite repeated previous commitments to board renewal, should leave every Sun-Times shareholder deeply concerned about the company?s future,? the release said.

The STMG board urges shareholders to vote against Davidson Kempner?s proposed plan.

The letter from STMG follows:

**

January 7, 2009

Dear Sun-Times Media Group Stockholder:

For more than two months, your Company has operated under a cloud of uncertainty created by the ill-conceived efforts of Davidson Kempner Capital Management LLC to replace the existing, well-qualified Board of Sun-Times Media Group, Inc. with its proposed hand-picked slate of directors. Now, as three directors have agreed to delay temporarily their planned departure from the Board until qualified replacements can be recruited, Davidson Kempner has accused your Board of seeking to "further entrench" itself. DK's accusation ignores reality and insults your intelligence.

The three directors in question had already publicly announced their intentions to step down from the board not later than December 31, 2008. They have agreed to stay on only so that the board can be properly restructured one way or the other. DK's accusation of entrenchment is a willful and irresponsible distortion of the truth.

Consider the facts:

* Last November, we announced an expedited process to restructure your Board and invited DK and its nominees to join in that effort. Davidson Kempner instead chose to subvert that process and to impose on all stockholders a group of individuals with no apparent understanding of either your Company or the markets in which Sun-Times Media Group publications operate.

* DK has rejected reasonable compromise proposals that, subject to customary vetting, would have placed each of the current DK nominees on the Board immediately, without the need for a costly consent solicitation, together with a small contingent of existing directors with continuing knowledge of the Company and its markets.

* DK has refused to permit your Board's nominating and governance committee to meet with or collect information from the Davidson Kempner nominees to evaluate their independence and other qualifications.

* DK's self-imposed goal of December 19, 2008 for completing its solicitation has come and gone, fostering uncertainly both within the Company and in the markets.

* Despite waging a long and unnecessary proxy campaign - the costs of which DK has stated it will seek to impose on the Company - DK continues to offer no concrete proposals for addressing the challenges facing the Company.

* Through it all, the DK nominees have remained silent, content to let DK do the talking, with no apparent ideas or plans of their own.

In contrast, your Board of Directors has set for Management an ambitious and concrete plan to reduce costs by more than $50 million with the overarching objective of achieving cash flow neutrality in the next 12 to 24 months. This is in addition to the $50 million in cost reductions achieved in 2008. Based on the direction from your Board, Management has embarked on a multi-pronged exercise to reduce costs and enhance revenues throughout the Company. Management has presented recommendations to the Board to modify its business model, build strong digital channels to its readers and viewers, and prepare the Company to compete effectively in the markets of the future. These efforts are based on a deep and thorough understanding of the Company's businesses and markets. Implementation of the plan is well under way.

At each stage of this process, your directors have remained steadfast in our focus on the long-term interests of our Company and our communities, not in the preservation of our own positions. Should DK's solicitation be unsuccessful, your Board's plan to restructure itself will go forward as previously announced. This Board is prepared to accept the decision of stockholders, whatever that decision may be. However, stockholders deserve to have the facts and to make an informed decision.

Please discard any WHITE consent card you receive from Davidson Kempner. If you have already returned the WHITE card, you have every right to revoke your consent.

Please sign, date and return the BLUE card that you have received from the Company, supporting your experienced Board of Directors, who have a real plan to address the challenges facing our Company.

Thank you for your support,
The Board of Directors of
Sun-Times Media Group, Inc.