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Media General: Hedge fund's board nominees lack experience

By MICHAEL FELBERBAUM, Associated Press Writer  Thursday, March 20, 2008

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RICHMOND, Va. (AP) -- Media General Inc., a newspaper publisher and television station operator, said Wednesday that the directors nominated by a major shareholder are not qualified to sit on the company board.

President and Chief Executive Marshall N. Morton reiterated in a letter to shareholders the company's opposition to the nominees, according to a U.S. Securities and Exchange Commission filing.

Media General is mired in a proxy battle with hedge fund Harbinger Capital Partners, an arm of Birmingham, Ala.-based Harbert Management Corp., which holds about 18 percent of the Class A shares in the publisher of the Richmond Times-Dispatch, The Tampa Tribune and Winston-Salem Journal.

"Harbinger's self-serving action has created a costly and counterproductive distraction for the company," Morton wrote. "While claiming to have stockholder value in mind, Harbinger's actions could in fact undermine our efforts to enhance shareholder value."

Shares of Media General fell 10 cents to $15.46 in afternoon trading Wednesday.

Harbinger announced in January it would nominate three directors to the board at Media General's annual meeting this spring, hoping to rehabilitate the struggling media company. It said it was not looking to change the company's dual-class stock structure.

Media General is controlled by the family of its chairman, Stewart Bryan. The family owns most of the company's Class B shares, which elect 70 percent of Media General's board. The other directors are elected by holders of the company's Class A shares.

In Wednesday's letter, Morton wrote that the company has dramatically reduced costs as it becomes more focused on the Internet. He conceded that "2007 was not a good year" and pointed to a depressed Florida economy and weak performance at its NBC-affiliated TV stations.

Morton also noted recent efforts to reduce debt and strengthen its balance sheet through the sale of its share of SP Newsprint Co. and a plan to sell as many as five TV stations.

The company said Harbinger's board candidates lack industry experience.

"It is extremely difficult to understand how these individuals could possibly contribute in a positive manner," Morton wrote.

Harbinger and Media General are scheduled to hold an April 1 meeting in New York hosted by Mario J. Gabelli, whose investment company is one of Media General's largest shareholders.

A spokesman for Harbinger did not immediately return a phone call seeking comment, but the investment group has criticized the company's judgment in managing its capital and for its growth strategy. Media General "has lost strategic, operational and geographic focus in recent years," Harbinger wrote in a regulatory filing.

Harbinger also holds a 19 percent stake in The New York Times Co., which recently agreed to support two people nominated by the hedge fund as directors.

The Times will expand its board from 13 to 15 to accommodate the new nominees, one of whom is Scott Galloway, a New York University marketing professor and shareholder activist who has been advising Harbinger.

That agreement calls for Harbinger to halt its campaign to have its own slate of four directors elected at the shareholder meeting. In addition to Galloway, the Times has also agreed to support James Kohlberg, co-founder of the investment firm Kohlberg & Co., as a director.

Media General spokesman Ray Kozakewicz said the company doesn't have plans to offer any board seats to Harbinger.

Besides its three metropolitan newspapers, Media General owns 22 daily community newspapers in Virginia, North Carolina, Florida, Alabama and South Carolina, more than 150 weekly newspapers and other publications and 23 network-affiliated television stations.

------ On the Net: Media General: http://www.mediageneral.com

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