Alarcon under attack


Spanish Broadcasting System is the latest public media company to have a disgruntled major shareholder issue a demand that the company sell itself or buy out the public shareholders. Discovery Group, a hedge fund known for actively pressuring company management to take action, charges the SBS CEO Raul Alarcon, whose super-voting stock gives him control of the company, is shortchanging other shareholders by refusing to talk with a potential buyer.

Discovery, which owns 9.8% of SBS’ publicly traded Class A stock, is appealing to the company’s board of directors to form a special committee of independent directors and hire an investment banker to investigate three alternatives for enhancing shareholder value: 1) cash out the public shareholders as "fair value" and go private; 2) sell SBS to a strategic buyer; and 3) remain public but end the dual-tier voting structure and make Alarcon give up either the Chairman or CEO post to someone else. The letter to the board charges that Alarcon has paid himself over 10.1 million in salary, 7.3 million in bonuses and over two million in perks since SBS went public in 1999, while the company’s market capitalization has plunged from 1.5 billion to about one-third that.

The dissident shareholder claims to know that a major media company, identified in the letter by code as "XYZ," is interested in acquiring SBS for at least twice its current stock price, but that Alarcon refuses to discuss the proposal.

RBR/TVBR observation: Might the mysterious "XYZ" be CBS? We understood back when Mel Karmazin was running Viacom/CBS that he very nearly cut a deal to acquire a majority stake in SBS and give CBS a foothold in the growing US Hispanic media market. However, that deal reportedly blew up because Alarcon insisted on retaining control.