Magazine article Editor & Publisher

After the Bell with Fitz & Jen: Newspaper Stocks Give Back Some Profits

Magazine article Editor & Publisher

After the Bell with Fitz & Jen: Newspaper Stocks Give Back Some Profits

Article excerpt

On a day of comparatively light trading in the sector, seven of the 13 publicly traded newspaper-heavy companies that E&P tracks ended on the down side on Wednesday. Media General (NYSE: MEG), which soared by nearly 14% on Tuesday, was down slightly, closing at $15.88, off 10 cents, or 0.6%. As Media General was trading down Tuesday, Harbinger Capital Partners filed with the Securities and Exchange Commission the presentation it made at Gabelli & Co., laying out its case in the proxy fight with the Richmond, Va.-based publisher and TV station operator over four seats on the board of directors. Harbinger, which in just ten months has become the company's second-largest shareholder with an 18.2% stake, said Media General has a "consistent but consistently flawed strategy," and has blundered badly in acquiring "non-core assets," such as the DealTaker.com buy earlier this week, and overpaying for a group of TV stations. Joseph Cleverdon, Harbinger's director of investments, said the group's stock has declined 59% since its first purchase ten months ago. He also said Media General has allowed consolidated net free cash flow -- EBITDA (earnings before interest, taxes, depreciation, and amortization) minus capital expenditures and interest -- to fall 65% since 2005, and 80% since 2004. Harbinger's solution: Cut costs more aggressively, reduce spending, and "most urgently, consider alternatives for Florida market properties." Media General has blamed much of its recent financial performance on the housing and employment collapse in Florida, which has badly hurt its biggest paper, The Tampa Tribune.

Marshall N. Morton, Media General's vice chairman and CEO, countered in his presentation that the company's dual-class stock structure, ensuring Bryan family control, allows the company to focus on the long-term. And far from being "non-core" assets, Morton said, the digital purchases, and the chain's "Web-first" approach to news, has positioned Media General for the future better than other newspaper companies. Fitz comment: Morton noted that the insiders with the B stock are hurting along with investors holding the publicly traded A stock. Under its rules, MEG B shares cannot carry a "control premium," and both classes pay the same dividend. On that point, Harbinger criticizes Media General for what it says is a too-generous dividend that should be cut to free up cash to pay down debt. Morton countered that Monday's sale of SP Newsprint, plus the impending sale of three TV stations, should generate about $100 million for debt reduction this year. …

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