Starboard, one of the largest shareholders of Media General, sent a letter saying the proposed acquisition of Meredith is “value destructive” and believes “a combination of Nexstar and Media General is highly strategic.”
The investment firm, which owns 4.5% of Media General’s shares, delivered the letter Tuesday to to J. Stewart Bryan III, chairman of Media General's board of directors, and CEO Vincent Sadusky, with a copy to the board.
“It is inconceivable to us that Media General would be willing to pay a premium multiple to acquire a company with a less desirable business mix while handing over management control to Meredith's incumbent management team whose background is primarily in operating publishing businesses,” the letter says. “From the perspective of a Media General shareholder, it is extremely difficult to understand the rationale for the Meredith transaction.
“In light of these and other serious concerns with the Meredith transaction we would vote our shares 'against' the pending transaction even before giving consideration to Nexstar's unsolicited proposal to acquire Media General.”
The letter goes on to say that Starboard reviewed “with great interest” Nexstar’s proposal Monday to acquire Media General to create a pure-play broadcasting company and was “surprised” to find out that the board had “refused to engage in discussions” previously with Nexstar.
“It is concerning to us, and we imagine to just about all of your shareholders as well, that management and the Board of Media General would refuse the opportunity to negotiate a potential value-maximizing transaction with Nexstar and instead proceed to expeditiously execute such an unconventional, value-destructive acquisition.
“We believe a combination of Nexstar and Media General is highly strategic. Nexstar management has a proven track record of execution and has created substantial value for its shareholders over the past five years. In addition, we believe Nexstar's estimated synergies of $75 million appear conservative with significant upside making any stock component of a transaction particularly attractive.
“Clearly, Nexstar is serious about pursuing a transaction with Media General, and it is incumbent upon the Board to make every effort to negotiate the best deal possible with Nexstar within the parameters of the current Meredith merger agreement.”
Starboard also says in the letter that both the Meredith and Nexstar deals are structured so as to require a shareholder vote.
“It is clear to us, and should be clear to the Board, that the Nexstar proposal is reasonably expected to lead to a superior proposal, as required under the Meredith merger agreement in order for Media General to enter into a confidentiality agreement and negotiate a transaction with a third party bidder. The Board should waste no time in making this determination so that discussions and due diligence with Nexstar can begin expeditiously.”
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