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Hedge Fund Kinnaras Capital's Recommendation to Media General Shareholders Ahead of Proxy Vote

April 12, 2012 | About:
Amit Chokshi

Amit Chokshi

10 followers
Media General (MEG) recently released it Notice of its 2012 Annual Meeting and Proxy Statement. The date is set for April 26, 2012 and will be held in Mechanicsville, VA. The Company is asking that shareholders vote on its Board of Directors slate. I wanted to provide further detail on the recommendations by MEG and suggest what action shareholders should take.

MEG’s voting structure with A and B Class shares is very favorable to the Company’s incompetent management team. Class B stockholders are able to place six Board members while Class A shareholders can only vote for three Board members. While this limits the influence of Class A shareholders, MEG shareholders can still send a loud message to management and the Board.

MEG is encouraging shareholders to vote for the following Class A directors. I have included my recommendation next to each suggested Board member for investors to review. MEG investors can refer to the proxy on page 36 to get the full bios as my commentary and recommendations will focus on the ability of the suggested Board member t actually add value to MEG.

Scott D. Anthony – Managing Director, Innosight LLC: MEG investors should know that Mr. Anthony is based in Singapore. MEG is facing numerous financial and operational challenges so having a Board member located and operating in a business environment far different than MEG’s only allows this member to be the typical “yes man” that management seeks. I cannot find any record of Mr. Anthony every purchasing a single share of MEG stock, further suggesting he has little confidence in the Company. The only ownership stake Mr. Anthony has in MEG are 47, 045 deferred stock units along with collecting an annual cash fee of roughly $30,000 for his “guidance”. Mr. Anthony is also known to have specific experience in innovation and digital platforms. This is a sad commentary on Mr. Anthony’s contribution to MEG given the Company has destroyed significant value through Blackdot, DealTaker.com, and NetInformer. I recommend that shareholders withhold their vote for Mr. Anthony.

Dennis J. FitzSimons – Chairman, McCormick Foundation: Mr. FitzSimons, like Mr. Anthony, is another Board member that has pillaged the Company, earning undeserved compensation at shareholders’ expense. As with Mr. Anthony, it is difficult to find any data indicated that Mr. FitzSimons ever purchased a single stock of MEG for himself. His only interest in MEG is a piddly 28,821 shares “awarded” to him by the Company. Mr. FitzSimons is well known in the “old media” industry, having served as CEO of the struggling Tribune Company. His reputation fits nicely with MEG’s management team which should be a significant concern to shareholders.

Mr. FitzSimons was accused by the Chandler family, a significant owner of his prior company Tribune, of “of not moving decisively enough” and in an open letter per reports from the Los Angeles Times, the Chandler family claimed Mr. FitzSimons ”failed to generate a viable strategic response” to changes in the industry and had allowed “value to deteriorate.” During his tenure, Tribune lost nearly 50% of its value. Mr. FitzSimons was then later named in a lawsuit when he steered Tribune into a leveraged buyout to Sam Zell, whereby FitzSimons walked away with tens of millions. The lawsuit stated that the Tribune LBO was “among the worst in American corporate history. The LBO was designed to cash out the large shareholders of Tribune and to line the pockets of defendant Samuel Zell and Tribune’s directors and officers.”

Mr. FitzSimons is apparently kindred spirits with CEO Marshall Morton and his cadre of harlequins but his professional experience is nothing more than a further blot on MEG’s reputation. I recommend that shareholders withhold their vote for Mr. FitzSimons.

Carl S. Thigpen – CIO, Protective Life Corporation: I am somewhat disdained that Mr. Thigpen holds the CFA designation. This designation includes an ethics and fiduciary component which Thigpen clearly demonstrates little adherence to. How can one have tenure on a Board such as MEG’s whereby management has delivered failure after failure and remain so complicit? Mr. Thigpen is deemed an “audit committee expert” yet a cursory look through MEG’s SEC filings reveals a number of incidents whereby the Company did not properly comply with SEC reporting guidelines. Once again, more wasted time was spent on responding to SEC comments due to errors made in filings that could have been spent on strategic efforts. Thigpen owns just 26,671 of deferred MEG shares, demonstrating like all insiders, that he has no confidence in management or the Company. I recommend that shareholders withhold their vote for Mr. Thigpen.

Unfortunately for Class A shareholders, the Board is only allowing Class B holders – essentially Chairman Bryan III – the opportunity to vote on executive compensation. While the Board is determined to show that it’s only allegiance is to CEO Marshall Morton, withholding votes for the Class A directors is simply another way in which investors can express their dissatisfaction with MEG insiders.

DISCLOSURE: AUTHOR MANAGES A HEDGE FUND AND MANAGED ACCOUNTS LONG MEG

About the author:

Amit Chokshi

Amit Chokshi is the founder and owner of Kinnaras and affiliated companies and is responsible for security analysis, selection, portfolio management, and Firm operations.  Prior to founding Kinnaras, he worked as an associate at the Royal Bank of Scotland ("RBS") in the firm's Corporate Advisory Services group, which provided corporate finance and mergers and acquisition ("M&A") services to the firm's clients with a particular emphasis on private equity firms.  Amit also worked at Morgan Stanley and received a B.S. in Finance from Bryant University and an MBA from Emory University.  In addition to passing the NASD Series 7, 63, and 65 exams, Amit is also a CFA Charterholder and on the Board of the Stamford CFA Society.  Amit has appeared on Bloomberg Radio and has also been quoted in various publications regarding Firm-specific holdings.


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