Bacon's Rebellion

Democracy Thrives in Sunlight

Hedge Fund Stalks Media General

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by

James A. Bacon
in

This is interesting. From the Wall Street Journal:

Harbinger Capital Partners Funds, a low-profile hedge fund managing $18 billion, nominated four candidates Friday for election to the board of New York Times Co. Together with another investor, Harbinger has 4.9% of the Times. The same day, it made a similar move on the Richmond, Va., newspaper and television-broadcasting concern Media General Inc., in which it has accumulated an 18.4% voting stake.

Why go after Media General? Under-performing stock, and a slew of assets that could possibly, and profitably, be spun-off:

Like the Times, Media General is family controlled and has faced pressure from discontented outside shareholders in recent years. It owns a chain of smaller newspapers in the Southeast, including the Tampa Tribune and Richmond Times-Dispatch, as well as 23 TV stations. The company has been hit hard by lower ad revenue in both its print and TV operations.

Management takes a decidedly Richmond attitude to the whole concept of outsiders seeking to change the company:

Media General Chief Executive Officer Marshall Morton noted in an interview yesterday that Harbinger’s proxy nominations were futile, as outside shareholders can elect only three of the nine seats on the board.

One-third control ain’t beanbag, Mr. Morton. But this quote strikes me as a corporate chieftain who is long overdue for seeking other employment:

“We’re an industry in transition,” he said. As for Harbinger, he said most investors who aren’t happy sell their stock and go on. “Why doesn’t he do that?” Mr. Morton added.

Many investors do that every day. But others, who think there is value in a company that the existing owners and their management team have either overlooked, or poorly developed, are eager to stay and fight for changes (and profits).

Given Media General’s two-tiered ownership structure, it is unlikely that any group of outsiders will be able to seize control of the company. Sometimes, though, all it takes is the threat of a takeover to make changes happen.

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  1. Anonymous Avatar
    Anonymous

    It makes sense that Media General is in play although the Bryant family owns so many “B” shares that they will still control the board no matter what the hedge fund does.

    Why? Simple. In the past several years MEG’s stock has plummeted from about $70 a share to $15 a share, although it’s up to $19 or so last time I checked. It is true that plenty of media companies have trouble but I don’t believe they have seen so much market cap disappear at once as MEG’s has.

    MEG’s problem is that it is based on cost-cutting, not growth. The leadership has no ideas. They pushed “Convergence” and “Clustering” about 10 years ago, but they haven’t worked. These involved trying to trade content across print/tv/Web but instead of creating new and valuable content, they were just dicing up stale content again and again. Clustering involved buying up dinky papers in the Southern exburbia. Neither strategy has worked, as the stock price shows.

    Morton, let’s not forget, is from the textile industry, which is not exactly known for successful growth strategies. He complained last week that the hedge fund didn’t appreciate “a research-driven understanding of our local markets” or the “heightened focus on customers” or the “continually growing number of new products and new sources of revenue, or the “successful “Web-First” approach to local news reporting that is generating increased page views and visitors” and the “new partnerships, diversification and regulatory gains that have strengthened and validated our convergence strategy.”

    What a pile of nonesense. Take their Web pages. They are horrible! Just about any regional media firm is far ahead. MEG is where The Virginian-Pilot was 10 years ago and that might insult the Pilot!

    Look at the Times-Dispatch. There is a massive rush for the exits as experienced reporters flee from the hare-brained news policies of Thomas A. Silvestri and his new management crew. Just look at Sunday’s front-page. Obama’s win in S. Carolina was huge. Yet, the TD editors gave 75 percent of the front page to the mock convention held at Washington & Lee in which they nominated Hillary. Huh? Let’s have Frazier Millner, their marketing expert, explain that one. Also don’t know if you’ve noticed but there’s one heck of a lot less content in the TD than ever. The “2-Minute TD” is more like the “30-second TD.”

    MEG has been in a tailspin for several years now. Nevertheless, Marshall Morton tried to get his corporate officers a bonus a couple of years ago, until Mario Gabelli, another rogue investor, put a stop to it.

    Best thing that can happen is if the Gabelli’s and hedge fund folk get rid of the current management. Let’s wish them well. Maybe they can put a stop to the arrogance and the incompetence.

  2. Jim Bacon Avatar
    Jim Bacon

    Norm, No one can take over Media General until Stewart Bryan dies, bequeaths his shares to his progeny and they decide to abandon ship, as the owners of the Wall Street Journal did. As much as I think Media General needs rejuvenation, I like Stewart and hope he has a few more good years in him. He probably does. His dad, as I recall, lived past 90. It’ll be a while before anyone succeeds in taking over the company.

    However, Marshall Morton is vulnerable. He made the extraordinary decision to expand, through acquisition, Media General’s local TV station holdings, even though local broadcast has been in a slide as bad as newspapers. I never understood the logic of that move. I would like to see a financial analysis of how much capital Media General committed to that acquisition and what earnings those stations are contributing now. I say that with regret because I like Marshall personally. He was always very cordial to me when I worked at Virginia Business.

    Anonymous 4:01, it’s really sad to see what’s happening to the Times-Dispatch. There are T-D alumni all over town… and even as far afield as Fredericksburg. I run into them all the time. I have one T-D friend who’s so demoralized that he said he’s ready to drive a truck — to do almost anything — rather than work there any longer.

    I will say this: The T-D is giving Bacon’s Rebellion a run for its money in the op-ed area. The editorial staff is doing a much superior job of soliciting op-ed pieces from authors who write from a Virginia or Richmond regional perspective. To some degree, the newspaper has filled the editorial void that it previously had created.

  3. Anonymous Avatar
    Anonymous

    Bacon,
    Baloney on Op-Ed. It’s still the same old establishment crowd telling us how great they are. Hinckle writes a bunch of libertarian nonsense that is a chore to read. As for the editor, he’ll tell us how wonderful an Episcopalian service is or how delightful Paris looks in season which is a relief from MacKenzie’s rabid dog performance. But it’s still lame as hell.

    You need to get out of Richmond once in a while and see the real world.

  4. Anonymous Avatar
    Anonymous

    It’s not just the Times-Dispatch where experienced reporters are fleeing. The Danville Register and Bee is in the same situation. CHURN. Massive CHURN.

    They recently fired me for complaining about a male reporter who filmed local business women’s breasts without their knowledge or consent and then showed them around the newsroom. Managing editor Arnold Hendrix and Assignment Editor Bernard Baker and Editorial Editor Robert Benson watched and laughed. That reporter was never fired or disciplined. Read my blog:
    http://www.danvillevablogspot.com

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