Dissidents Get Foothold on Media General Board

Hedge Fund Harbinger Capital Partners Pushing for Changes Due to Slumping Stock Price

By Robert Marich -- Broadcasting & Cable, 4/25/2008 10:32:00 AM

Three director nominees put forward by a dissident investor group won Media General board seats at a shareholders’ meeting Thursday in Mechanicsville, Va., beating management-backed candidates.

The directors back hedge fund Harbinger Capital Partners, which holds about 18% of Media General’s class-A shares and is pushing for big changes to revive the company’s slumping share price. Separately, Harbinger was recently granted two seats on the board at The New York Times Co. after some verbal jousting.

The share price of the Richmond, Va.-based newspaper group and broadcaster slumped 60% in the past year -- a trend experienced by other companies with newspapers. Media General stock rose on the new of dissidents getting a foothold.

The new directors will hold one-third of Media General’s nine board seats, but due to a dual-class stock structure, the family of chairman Stewart Bryan controls the rest. Six other company-backed directors were also elected.

In a statement, Media General president Marshall Morton gave an overview of the company’s economic outlook and turnaround efforts: “This fall, we expect significant political-advertising revenues, and we expect to generate approximately $40 million for the year as a whole. Ohio, Florida and Virginia are expected to be particularly strong states for presidential-campaign spending. We look forward to the return of the Summer Olympics on our NBC stations and expect related advertising revenues to be $13 million-$14 million.”

Morton continued, “We signed new cable retransmission agreements in the first quarter that provide compensation for our stations. In past negotiations, we were successful in obtaining full carriage of our secondary channels, as well as some lucrative promotional trades. Many of our cable contracts expire Dec. 31, and others expire in 2009, while a few run into 2011. We will begin negotiations with some of these systems later this year.”

He concluded: “We are implementing a number of actions that are designed to reduce expenses across the company by $25 million-$28 million. In addition to redeploying approximately $100 million in proceeds from asset sales, we are using operating cash to repay debt and using less for capital spending this year compared with the past few years. Debt at the end of 2008 is expected to be approximately $770 million, compared with $898 million at the end of 2007. Beyond all this, a modest improvement in Florida and any rebound in the U.S. economy would be significant.”

Media General’s board also declared a regular quarterly dividend of 23 cents per common share in conjunction with the shareholders’ meeting.