Dissident airs its grievances


Harbinger Capital has spelled out what it thinks is wrong with the way Media General is being run. In its pitch to have three candidates elected to the board of directors, Harbinger charges that the company has been too focused on building top-line revenues and investing in non-core ventures.

Harbinger, which owns 18.2% of the company’s Class A stock, insists that it is not out to change the two-tiered voting system at Media General, which gives holders of Class B stock, most of which is in the hands of Chairman J. Stewart Bryan and his family, the right to elect two-thirds of the board. The hedge fund is urging Class A shareholders to return its green proxy card, rather than the white one from the company, to vote for Dan Sullivan, Eugene Davis and Jack Liebau Jr.

“Each of the Harbinger Nominees as broad, relevant industry and/or financial expertise, and a vote in favor of each of the Harbinger Nominees will enable the stockholders of Media General to send a clear and strong message to the company’s board of directors that you agree with Harbinger’s belief that change is necessary and with Harbinger’s objective of implementing more effective board oversight and re-examining and re-focusing the Company’s operations and strategic direction in an effort to sustain and maximize stockholder value,” the hedge fund said in its pitch to fellow shareholders.

Here is what Harbinger wants to change:

• Harbinger believes that the Company has lost strategic, operational and geographic focus in recent years and has demonstrated lack of judgment in its capital allocation and growth strategy decisions. For example, Harbinger believes the Company overpaid in its acquisition of four NBC affiliate stations in 2006 by buying the stations at a multiple of 2004-2005 combined average broadcast cash flow that has caused the transaction to be dilutive to Company earnings. The Company simultaneously lost geographic focus in the transaction by acquiring stations located outside its core Southeastern US market. The Company’s 2003 and 2004 investments in NTN Buzztime Inc., a publicly traded interactive entertainment company, have lost approximately 67% of their market value to date. Furthermore, Harbinger believes that the Company’s recently acquired online advergaming and online social shopping portal ventures have diverted management’s attention away from the Company’s core businesses at a time when management’s online strategy should instead serve to directly magnify the value, content and reach of its core television and newspaper properties and produce meaningful incremental cash flows.

• Fundamentally, Harbinger believes that these problems have stemmed from a lack of board independence and outside media expertise, as well as a misplaced focus on boosting top line revenue and investing in non-core ventures rather than on earnings accretion and return on capital. Based on the Company’s public disclosures, none of the Company’s incumbent Class A directors possess substantial media-related business experience apart from their positions as insiders on the Company’s board. Furthermore, in its public statements and conference calls, the Company very rarely mentions earnings per share as a measure of the Company’s performance and apparently has never addressed return on capital or any similar metric which relates directly to shareholder value, choosing instead to focus on size metrics and increases in the number and complexity of the Company’s business lines.

• For these reasons, Harbinger has assembled a slate of three highly qualified individuals who, we believe, have strong financial credentials and substantial prior media industry experience – as operators, investors and/or board members – and who bring deep expertise and perspective on both broadcasting and newspapers from outside the Company. Harbinger believes the election of the Harbinger Nominees to the Company’s board of directors is the most effective way to increase the board’s independence and oversight, bring fresh ideas and valuable perspective to board deliberations and increase the Company’s focus on maximizing shareholder value going forward. If elected, Harbinger believes that the Harbinger Nominees would seek to work constructively with the other members of the board to provide guidance and oversight to management and help the Company address more directly and effectively the challenges it faces.