Tegna disputed claims made by investment company Standard General LP, which owns a 9.7% stake in the broadcaster and is seeking four seats on its board.
“Since Standard General disclosed its investment in Tegna, our Board and management team have held multiple meetings with [Standard General Managing Partner] Soohyung Kim to learn about his perspective on Tegna,” Tegna said in a statement Wednesday. “In those meetings, Mr. 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 also said that it did not think KIm would be an appropriate director.
“Tegna’s board has thoroughly evaluated Mr. Kim as a potential director. 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,” Tegna said.
“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. “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. Accordingly, the Board unanimously determined that adding him to the board is not in the best interests of Tegna and its shareholders. Mr. Kim was informed of the Board’s decision on January 10.”
In a letter to shareholders, Standard General said that given its “substantial investment in TEGNA, our expertise in the broadcasting industry, and our focus on driving value for all TEGNA shareholders, we strongly believe that Tegna shareholders would benefit from having a representative of Standard General on the Tegna board.”
Tegna said it is open to hearing from Kim about Tegna’s business as a shareholder and that its board will evaluate the other three people Standard General has nominated as directors.
Here is Standard General’s letter to Tegna shareholders:
Dear Fellow Shareholders,
Standard General L.P. and its affiliated investment funds are the owners of approximately 9.7% of the outstanding shares of TEGNA Inc. 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.
Standard General has an excellent track record of delivering profitable outcomes in similarly situated local television broadcasting companies. Media General, Inc. (NYSE:MEG) was a publicly-traded broadcaster which, like TEGNA, had a long tradition in print media, but had divested those assets to pursue a pure-play broadcasting strategy. From our position as a substantial shareholder, and with a single Standard General principal on the board, we worked constructively with the management team and directors to help guide the company through a merger with publicly-traded LIN Media LLC (NYSE: LIN) that more than doubled its station portfolio. Following that merger, we helped oversee substantial increases in cash flow through a series of operational improvement initiatives and strategic acquisitions before ultimately selling the combined company to Nexstar Media Group (NASDAQ: NXST) in a cash and stock transaction valued at approximately $5 billion. The sale price represented a multiple of 11.2x EBITDA and an implied return of 179% during our 3.6 years of ownership. Holders who continue to own the stock today have earned a 280% return over 6.6 years.1
Standard General invested in TEGNA because of our conviction that TEGNA should be the premier pure play local broadcasting company. TEGNA is the most important local affiliate television broadcasting company not currently at the regulatory ownership cap. TEGNA owns more Big 4 network affiliates in top 30 markets than any company save the network operators themselves. 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. From the time of TEGNA's spin-off of Cars.com to become a pure-play broadcaster in June 2017 until Standard General disclosed its ownership stake on August 14, 2019, TEGNA's stock price declined by 13% vs. a 39% increase for its peer group and a 17% increase for the S&P 500. In contrast, since we disclosed our ownership stake and the press 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.
Given Standard General's substantial investment in TEGNA, our expertise in the broadcasting industry, and our focus on driving value for all TEGNA shareholders, we strongly believe that TEGNA shareholders would benefit from having a representative of Standard General on the TEGNA board.
We 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. In our view this 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.
We believe that the addition of our four highly qualified, diverse and independent nominees to the TEGNA Board is a critical first step to ensure that TEGNA is on the right path to maximize value for all shareholders. Our nominees have significant operating experience in the television broadcasting industry and backgrounds spanning strategic planning, finance, M&A, and technology. Collectively, they have decades of experience as CEOs, CFOs, COOs, and directors of well-performing broadcasting companies. Our nominees are committed to rigorous oversight of TEGNA's management, operations and business strategy. Importantly, with the addition of our nominees, TEGNA's board would much better reflect the diversity of its audience.
We look forward to engaging with you and sharing additional detail on our plans for TEGNA in the coming weeks and months.
Standard General L.P.
Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.
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