In what is being described as a proxy fight, New York investment firm Standard General has nominated four directors to the board of TV giant Tegna. The hedge fund, which has a 9.7% stake in Tegna and is a financial partner with Emmis Communications, says the TV group has “consistently underperformed its closest broadcasting peers.” Drawing the most ire is Standard General’s nomination of its founder, Soohyung Kim. The firm’s other nominees to the 11-member Tegna board are Colleen Brown, Ellen McClain Haime and Deborah McDermott.
“Standard General invested in Tegna because of our conviction that Tegna should be the premier pure play local broadcasting company,” the company said in a letter to Tegna shareholders. “Given the quality of its assets, Tegna should be delivering best-in-class performance, and commensurate shareholder returns. Tegna shares, however, have consistently underperformed its closest local broadcasting peers.”
Tegna responded with a statement that said, in part, that the company “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. The 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.”
Standard General recently purchased a majority stake in urban AC WBLS (107.5) and rhythmic CHR “Hot 97” WQHT New York. As earlier reported by Inside Radio, the investment firm is paying $91.5 million to Emmis for a 76% equity position in the venture they’ve named Mediaco Holdings in which Emmis will retain 23.7% stake. Emmis will receive an additional $5 million under a five-year promissory note.
The firm also entered into a $64.2 million deal to buy 15 radio stations and 11 television stations from Bill Christian and Mike Reed’s Sound Communications.
“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,” Standard General’s letter to shareholders continued. “Our interests are directly aligned with yours… Standard General has an excellent track record of delivering profitable outcomes in similarly situated local television broadcasting companies.”
Standard General says they “did engage the company in an effort to reach a consensual solution, and are disappointed that members of management and the Tegna board refused our reasonable request for board representation.” The firm says that the refusal “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. As a result, we are compelled to take the step of nominating our own candidates for election to the Tegna board.”