Since 1997, Soohyung Kim has been investing in “special situations strategies.” In July 2019, the founding partner and Chief Investment Officer of Standard General went from a relatively unknown figure to the newest believer in the broadcast media industry.
On that day, the man many simply call “Soo” also became the Chairman of a newly formed entity that sees Standard use some of its $1.5 billion in available investment dollars by teaming up with Emmis Communications and his long-time friend, Jeff Smulyan, in the creation of Mediaco – the new licensee of WBLS-FM and WRKS-FM in New York.
In late August, the spotlight on Kim became much brighter, thanks to his acquisition of a big chunk of TEGNA shares. This set the wheels in motion on Standard General’s nomination of Kim and three others for election to TEGNA’s Board of Directors at its 2020 annual shareholders meeting.
TEGNA had issues. It still does. Kim’s nomination has been rejected.
In a lengthy statement issued just prior to Wednesday’s Opening Bell on Wall Street, TEGNA explained its actions. At the same time, TEGNA disputed a Bloomberg report that claims Standard’s nominations came after its push for the TV station owner to explore “strategic alternatives, including a sale, was stonewalled.”
As RBR+TVBR exclusively reported on August 21, 2019, TEGNA confirmed that Apollo Global Management, the entity that conducted a private buyout of Cox Media Group and Northwest Broadcasting and also has a stake in Charter Communications — approached the company formerly known about Gannett about a possible sale.
What TEGNA didn’t note was the that New York-based Standard General L.P. took a new position in the company formerly known as Gannett in Q2 2019, with TEGNA shares taking up 17.3% of its portfolio.
An August 14, 2019 SEC filing confirmed that Standard snagged 8,869,861 TGNA shares; this represents $134.36 million in total value.
In its Jan. 15, 2020 statement, TEGNA notes, “Since Standard General disclosed its investment in TEGNA, our board and management team have held multiple meetings with Mr. Kim to learn about his perspective on TEGNA.”
In those meetings, TEGNA says, Kim “demanded” a board seat for himself “but offered no specific ideas to create value – only statements that if he were on the Board, he would have a unique ability to source and execute ‘transformative’ M&A.”
TEGNA then took issue with a Bloomberg report distributed Wednesday morning, which stated that Standard General discussed its views with management but that TEGNA “stymied its push” for board representation and a call to explore strategic alternatives. Bloomberg cited unnamed sources close to the matter.
TEGNA called the press account “patently false.” It continued, “Kim has not suggested any transactions to us, and our board and management team have a track record that demonstrates their openness to all paths to create value for all of TEGNA’s shareholders.”
Standard General has roughly 9.8% ownership of TEGNA, as of October 2019, and the spat between the company and Kim is igniting interest in its stock. As of 12:25pm Eastern, shares were up 3.1% to $17.52 – its highest price since November 2015. One year ago, TGNA was priced at $11.78.
‘SERIOUS CONCERNS’ ABOUT SOO
TEGNA’s Board of Directors “thoroughly evaluated” Soo Kim as a potential director.
In its Wednesday statement, the company noted that board members, including the independent Chairman and members of the Nominating and Governance Committee, held several meetings with him, interviewed a number of people who have served with him on other boards (including those he offered as references), and conducted a detailed assessment of his track record and current investments in the broadcasting industry.
From these meetings, unease over Kim increased.
“The Board has serious concerns about Mr. Kim’s prior business and board service, including a track record of endorsing and executing corporate actions in favor of his own investments to the detriment of other shareholders,” TEGNA said.
It added that its board is also concerned “that his significant investments in and influence over other broadcasting companies would create a conflict of interest as a TEGNA Director.”
This could include his partnership with Smulyan for Mediaco. Thanks to recent FCC approval, Mediaco’s first two assets are the nation’s biggest radio stations superserving African Americans — WBLS-FM and WQHT-FM “Hot 97” in New York.
But, it is far more likely that TEGNA is referring to the May 2019 acquisition of two TV stations in Providence, R.I., and Lincoln, Neb., by Standard Media Group. While this is led by former WKRN-2 in Nashville GM and ex-Young Broadcasting chief executive Deb McDermott, and is wholly separate from Mediaco, it is believed that Kim ultimately holds fiscal control of both entities.
In a July 2019 interview with RBR+TVBR, Emmis founder Smulyan said of Mediaco and of Kim, “He wants to make this a major company. He just needed to be in an area where he felt we need to grow returns on the business. We’re getting a lot of cash, and [Soo is getting] a launching pad.”
Then, there is a 2014 TVNewsCheck story that used the headline “The Most Important, Least Known Man in TV” to describe Kim.
With Standard and McDermott in the TV business already, TEGNA’s board put its foot down. It unanimously determined that adding Kim to the board “is not in the best interests of TEGNA and its shareholders.”
SOO’s STRONG TEGNA TAKE
Kim was informed of the Board’s decision on January 10.
That didn’t stop Standard General from starting the tit-for-tat early Wednesday, ahead of the Bloomberg report. In a letter to its shareholders, Kim addressed the nomination of “a slate of four highly qualified, diverse and independent candidates.”
He continued, “We are the company’s largest shareholder, excluding index funds, and we own approximately 20 times as many shares as the current board and management combined. Our interests are directly aligned with yours.”
He noted how Standard played a pivotal role in LIN Media’s merger with Media General, and that it invested in TEGNA “because of our conviction that TEGNA should be the premier pure play local broadcasting company,” calling it “the most important local affiliate television broadcasting company not currently at the regulatory ownership cap.”
For Kim, “Given the quality of its assets,” TEGNA should be delivering “best-in-class performance, and commensurate shareholder returns.” That, in his view, isn’t happening today.
“TEGNA shares … have consistently underperformed its closest local broadcasting peers,” he claims.
But, since Standard disclosed its ownership stake and RBR+TVBR reported that Apollo Global Management was interested in buying TEGNA, the stock price has increased by approximately 25%. “In our view, this disparity in stock price performance underscores that investors want and expect significant changes at TEGNA,” Kim said.
He added that TEGNA’s refusal to grant Standard’s “reasonable request for board representation … reflects a continued pattern of passivity by the TEGNA board in the face of persistent underperformance, a questionable M&A strategy, excessive leverage and, recently, the apparent rebuff of an acquisition proposal at a premium valuation from a credible buyer.”
This led Standard on Wednesday to nominate its own candidates for the TEGNA board.
TEGNA fought back.
“TEGNA has a highly qualified, independent and diverse board with a strong track record of generating value for shareholders,” the company said.
TEGNA’s board of directors is comprised of President/CEO Dave Lougee, Mighty Networks CEO Gina Bianchini, Dell Technologies Services and Digital CEO Howard D. Elias, DAZN Group CEO Stuart Epstein, Pfizer Chief Digital and Technology Officer Lidia Fonseca, MS&E Ventures founder Scott McCune, former HBO Home Entertainment President Henry McGee, former FCC Commissioner Susan Ness, former E*TRADE CFO Bruce Nolop, WNET President/CEO Neal Shapiro, and LookLeft Media founder Melinda C. Witmer.
TEGNA says its board remains open to hearing Kim’s perspectives on TEGNA’s business as a major shareholder. Additionally, the board will evaluate the three other Standard General nominees — identified for the first time today by Kim, consistent with TEGNA’s standard review process.
“The Board will then make a determination that it believes will best serve the interests of the company and its shareholders,” TEGNA notes.
Wachtell, Lipton, Rosen & Katz is serving as legal counsel to TEGNA.