Harbinger gets three on MG Board

[Moderator1]

Not at all sure what it all really means, that's way too "inside the business" for an old dumb ass like me. But it sounds like a big F You from shareholders to MG, which campaigned pretty hard to keep these people off the board.
This went out today:



April 24, 2008
Dear Fellow Employees,
Media General held its Annual Meeting of Stockholders this morning. Based on preliminary election results, it appears that the three individuals nominated by the Harbinger hedge fund were elected to the company's Board of Directors. Our press release has been posted to theMeganet.
We are disappointed that three very capable directors, who have contributed significantly to the Board's deliberations, both through their ability and their experience, have been displaced.
I want you to understand that Harbinger cannot, under any circumstances, forcibly gain control of Media General, and that the three new directors cannot gain control of our nine-member Board.
We will listen with courtesy to the ideas of the new directors, but, frankly, I believe they are going to have to prove themselves worthy of their places on our Board before they will be able to earn the confidence of the remaining directors.
I appreciate the many notes of support I received during the proxy contest. Throughout, you stayed focused and continued to make a difference to our audiences, our advertisers and the communities we serve.
You deserve tremendous praise for the successes we have been achieving. Through your efforts, we are transforming the company into a new media enterprise. We know that our customers are in charge, and we are leading change to meet their needs. Employees across our company have created opportunities for us to:
Foster a critical culture of innovation
Adopt a successful Web-First strategy in all of our newsrooms to increase total audience and market share
Create targeted new products to reach new audiences and attract new advertisers
Expand our interactive advertising services to generate new revenue and cash flow streams
Complete the transformation to digital broadcasting, launch high-definition local newscasts and use the expanded digital spectrum to offer secondary channels in many markets
Deliver our content to mobile consumers via cell phones and other portable devices
We will succeed because we have the right strategic focus, the right tools and you are the right employees. Thanks to the relationships we've built with consumers and the skills we've developed to address their needs, when people want information about their communities, they turn to the Media General brands in their markets. Consumers value our information and we intend to continue to be the leading provider of news, information and entertainment in all our markets.
Your continued support of our mission, our values, and our strategy for success is the right way to build shareholder value for all of us.
Thank you.
Yours sincerely,


Marshall N. Morton
President and Chief Executive Officer

 

[Moderator1]

Yeah, I'm talking to myself. You got a problem with that?!?

My old friends have to attend a "State of Media General" meeting every year. This, one tells me, is what some heard yesterday:

* We have 60 positions that are currently open and will remain so indefinitely.
* We are narrowing the paper again, along with the aforementioned 16 pages a week we're losing. Yet, we're raising delivery rates again.
* We are no longer delivering to neither the western part of the state nor D.C.
* We closed one of our 10 distribution centers.

One of the things we were told? "The future is web and digital first, but the present demands a dynamic paper."

The future is bright.

 

[SportsGuyBCK]

Yeah, I remember those "State of MG" meetings, and the videotape we were forced to watch ... what a waste of time and resources ...

 

[Moondoggy]

Harbinger apparently has little power other than to rouse the rabble, which doesn't take much these days. I can't imagine MG ignoring them completely, though. It could be a ploy by the hedge fund to get a big buyout and get out of town. One problem: where would the $$$ come for the payoff?

This points out completely the merits of private ownership (assuming you have the right private owner, of course). The big boys hate to go private because stock fuels their ridiculous bonuses, but something like that might spur MG to at least think about it.

 

[derwood]

This will give them access to a lot more company data.

 

[Armchair_QB]

The fact that these three guys work for a group called "Harbinger" is pretty ****ing funny.

 

[Sam Mills 51]

Yeah, I remember those "State of MG" meetings, and the videotape we were forced to watch ... what a waste of time and resources ...

Word for Word ...

Also, that Harbinger got those spots on the board is a big F you to Marshall Morton, who (rightfully) spoke out against Harbinger. I wonder how much heat he's now feeling as a result.

 

[Hustle]

Is harbinger a company or just a fund? If the former, can i run for a seat on their board?

 

[PeteyPirate]

Harbinger is doing what's called activist investing. They buy in low, raise hell about the practices that are driving down stock value, get MG to make some changes (fire people) and then sell when the stock goes up to their satisfaction.

 

[Birdscribe]

Harbinger is doing what's called activist investing. They buy in low, raise hell about the practices that are driving down stock value, get MG to make some changes (fire people) and then sell when the stock goes up to their satisfaction.

For ready reference, see "Sherman, Bruce" and "Ridder, Knight" for what can happen here.

Or Google the name "Nelson Peltz" and see what shenanigans come up there.

 

[Mighty_Wingman]

Activist shareholders certainly don't have a great reputation, but doesn't Transitive Property of ****tiness apply here?

If Marshall Morton doesn't like them -- and judging from the effort he spent lobbying to prevent the Harbinger guys' election to the board, he doesn't -- couldn't that imply good things?

I'm only half-kidding: Morton and his ilk are, after all, the ones who continue to provide increasingly sclerotic and half-assed solutions to the problems facing the industry, and they're not doing a great job. Wouldn't a new approach -- even one that involves a great deal of pain -- be better than Morton's apparent plan of death by 1,000 cuts?

 

[Birdscribe]

Activist shareholders certainly don't have a great reputation, but doesn't Transitive Property of ****tiness apply here?

If Marshall Morton doesn't like them -- and judging from the effort he spent lobbying to prevent the Harbinger guys' election to the board, he doesn't -- couldn't that imply good things?

I'm only half-kidding: Morton and his ilk are, after all, the ones who continue to provide increasingly sclerotic and half-assed solutions to the problems facing the industry, and they're not doing a great job. Wouldn't a new approach -- even one that involves a great deal of pain -- be better than Morton's apparent plan of death by 1,000 cuts?

"Transitive property of ****tiness" -- that's outstanding.

Excellent point, MW, but this argument is two sides of the same coin (to employ a bad pun).

There's nothing wrong with buying a publishing stock, but these hedge-fund barons are doing so with the unrealistic expectations that all of a sudden these companies are going to turn into the next Google and start growing earnings 25% a year.

Their only solutions are to slash-and-burn, thus devaluing the product they're ostensibly trying to improve. In otherwords, destroying the village in order to save it.

When activist investors come in and impose their will on a company, they're doing so with the implicit intent of improving productivity, cutting costs and therefore, growing earnings. If all goes according to plan, the stock price should follow.

Slashing and burning -- as we've seen ad infinitum -- a newspaper merely results in lost circulation, lost advertising and ... well, you know the rest of the story.

Buying into a publishing company with the concept that this is a cash-cow business that will generate X amount of money a year is a realistic employment of assets. Buying in with the expectations that you're going to get a four-bagger out of it isn't.

 

[dixiehack]

I want you to understand that Harbinger cannot, under any circumstances, forcibly gain control of Media General, and that the three new directors cannot gain control of our nine-member Board.

Until next year's election, when three more seats are presumably up for grabs.

 

[GB-Hack]

I want you to understand that Harbinger cannot, under any circumstances, forcibly gain control of Media General, and that the three new directors cannot gain control of our nine-member Board.

Until next year's election, when three more seats are presumably up for grabs.

Not so Dixie. The Class A shareholders get to elect three board members each year. The Class B shareholders, which happen to be the family of chairman J. Stewart Bryan III, elects the other six board seats. Therby the family would still have control of the boardroom by a 2-1 majority as long as they block vote.

 

[Mighty_Wingman]

"Transitive property of ****tiness" -- that's outstanding.

Excellent point, MW, but this argument is two sides of the same coin (to employ a bad pun).

There's nothing wrong with buying a publishing stock, but these hedge-fund barons are doing so with the unrealistic expectations that all of a sudden these companies are going to turn into the next Google and start growing earnings 25% a year.

Their only solutions are to slash-and-burn, thus devaluing the product they're ostensibly trying to improve. In otherwords, destroying the village in order to save it.

When activist investors come in and impose their will on a company, they're doing so with the implicit intent of improving productivity, cutting costs and therefore, growing earnings. If all goes according to plan, the stock price should follow.

Slashing and burning -- as we've seen ad infinitum -- a newspaper merely results in lost circulation, lost advertising and ... well, you know the rest of the story.

Buying into a publishing company with the concept that this is a cash-cow business that will generate X amount of money a year is a realistic employment of assets. Buying in with the expectations that you're going to get a four-bagger out of it isn't.

Great points. Color me convinced.

 

[Michael_ Gee]

What's killing the newspaper industry for its employees (and former employees) is that it's still a profitable business, not it's dying. Newspapers still cost too much to buy as a business. The investment debt load forces the cutting-own-throat business model. Even the greediest businessmen don't think they can cut their way to huge profits, not really. But if they need those profits to meet their payments and keep the bank happy, they'll try their damnedest.
I was told by a source I believe that the estimated price anyone would pay to take the Globe off the hands of the Times Corporation is $250 million. Since the Times paid $1.1 billion, they're not eager to do that. That might really get the Sulzberger family split enough for an outside takeover of THEM. But, that horrible decline is, I think, actually good news. The business will only grow again when its owners can afford to expand.
One problem with this whole Internet revolution thing is that businesses find it hard to switch to a new model if it hurts cash flow. For businesses in debt, it's just impossible.

 

[Mystery_Meat]

I'm not part of the dysfunctional clan that claims itself as the Media General family, but I did meet Marhsall Morton at a party and he's a pretty quality guy. He talked me up about some confounded internet experiment one of the L.A. papers was trying out with high school coverage, and he seemed like he a) cared about the quality of the print product and b) didn't mind slumming with the proletariat of the MG caste system (hi everybody!). Which is more than I can say for some of the other assbutts who breathe the thin air at the higher strata of MG.

 

[Moderator1]

Meat and Marshall hanging? That's pretty cool.
I've said on other threads: Of all the problems in the business, Marshall Morton is not one of them. The fix is bigger than one man and I'm not sure how much quality help he's getting.

 

[The Big Ragu]

Moddy, I know only a little about the company--and it is OLD knowledge--but without looking at it from the employee perspective of the people working at those papers (what you and most of the people on here care about, of course), it is exactly what it looks like. Someone had a large financial stake in the company. Typically when investors put up a challenge to the board of directors it means they don't think they are getting enough shareholder value. They want changes. I have no idea what those changes are with regard to Media General.

Correct me if I am wrong, but aren't most of Media General's share's family owned? If I am right about that, my guess is that as annoyed as a hedge fund that has amassed a large stake is, they do not have the ability to take over the board.

So if it is the company I am thinking, my guess is these new board members will be flies in the ointment--but they can't lower a hammer, as much as they might want to.

That can be good or bad. Sometimes when you have a single entity controlling a board and management, they fall into bad patterns. And new blood can force them--usually kicking and screaming--to think a little outside the box. The opposite can hold true. They can just be pains the in asses to the point that their only intention is to try to take over the company. I doubt that is the case, though, knowing what little I know about the newspaper business. Without knowing Media General's business, I could take an educated guess that you now have a couple of new board members who want to cut costs (I have no idea what those costs are). I'll bet anything it begins with a look at holdings and suggestions that they start selling certain assets. Just a hunch -- and I can say that without knowing very much about the company and still offer reasonable odds that I am right.

 

[Birdscribe]

BTW, following up on my earlier post referencing Bruce Sherman, from Sunday's NYT:

http://www.nytimes.com/2008/05/04/business/04sherm.html?_r=1&ref=business&oref=slogin

I'd say karma's a *****, but it just doesn't quite ring true when the guy still has more money than Yahweh.