NEW YORK, March 31, 2020 /PRNewswire/ -- Standard General
L.P., the largest active shareholder of TEGNA Inc. ("TEGNA" or the
"Company") (NYSE: TGNA), with an ownership interest of nearly 10%
of the Company's outstanding shares, has mailed its definitive
proxy statement to shareholders of TEGNA, soliciting support for
the election of four exceptional candidates to TEGNA's Board of
Directors at the Company's 2020 Annual Shareholders Meeting, which
is scheduled for April 30,
2020.
Standard General has also sent a letter to its fellow TEGNA
shareholders and launched a website with additional information
about the urgent need for change at TEGNA. The letter and website
can be accessed at www.TomorrowsTEGNA.com.
The full text of the letter mailed to shareholders today is
included below:
March 31, 2020
Dear Fellow TEGNA Shareholder,
Standard General L.P. is the largest active shareholder of
TEGNA. We have long invested in publicly-traded local broadcasters,
and that experience has led us here. TEGNA has a portfolio of
strategically important assets—with more Big 4 affiliates in the
top 30 markets than any other company. Given the quality of its
stations, TEGNA should be delivering best-in-class performance and
commensurate shareholder returns.
Unfortunately, TEGNA shares have been a long-term
underperformer. From the time TEGNA completed the spin of its
newspaper publishing business until media reports surfaced
suggesting takeout interest in the Company in August 2019, the Company's total shareholder
returns have dramatically underperformed the market, TEGNA's
hand-picked peers and closest competitors.
We believe one of the key reasons for TEGNA's underperformance
is the lack of relevant industry expertise on its Board. None of
TEGNA's eleven independent directors has operating experience in
local affiliate television broadcasting. That is why we nominated
candidates with decades of C-suite and directorship experience in
publicly-traded local affiliate television broadcasting companies,
and backgrounds spanning strategic planning, finance, M&A and
technology. If TEGNA remains an independent public company, as the
current Board evidently expects, we believe it needs directors with
the expertise our nominees bring, in order to realize the Company's
full potential.
PREMIER ASSETS BURDENED BY MANAGEMENT MISSTEPS
Dave Lougee has been CEO for
almost four years, and was the longtime President of Broadcasting
for TEGNA's predecessor Gannett. In total, he has been responsible
for the performance of TEGNA's assets for the last 13 years.
During his long tenure, the Company has failed to take advantage
of many critical industry developments. TEGNA missed its chance to
create highly profitable duopolies, and has done little to optimize
its portfolio of stations to take advantage of the UHF discount for
FCC ownership cap calculations. The Company lags the operating
margins and retransmission rates of its leading pure-play peers.
TEGNA's lack of operational prowess is evident from the current
performance of stations acquired by TEGNA from Belo during Mr.
Lougee's watch. In the years following the acquisition, 9 of the
top 11 stations acquired lost market share and are now ranked lower
in their respective markets. Only one of the seven #1 ranked
stations TEGNA acquired from Belo has maintained its ranking.
We will be providing more information on TEGNA's performance
failures and strategic missteps in an upcoming investor
presentation.
THE BOARD HAS FAILED TO HOLD MANAGEMENT ACCOUNTABLE
Despite underwhelming operating and share price performance,
TEGNA's Board has done little to hold management accountable. Mr.
Lougee's compensation has increased every year, and between 2015
and 2019, his total compensation almost doubled. Despite receiving
over $35 million in compensation over
the last 13 years, Mr. Lougee owns less than $4 million of TEGNA stock, less than he sold over
the last decade. As the leader of our Company, Mr. Lougee has not
bought a single share of stock in the open market in more than a
decade. In short, Mr. Lougee has been overpaid and his equity
ownership is poorly aligned with shareholders.
Worse, the Board has supported and enabled Mr. Lougee's
value-destructive acquisition strategy, seemingly aimed at growing
the scale of TEGNA without regard for shareholder value. Since
2018, TEGNA has completed approximately $2
billion of cash purchases—more than 80% of the Company's
current stock market capitalization. TEGNA paid excessive prices
for the stations it acquired and did not create duopolies, which is
the source of efficiencies and synergies that management originally
touted as a rationale for industry consolidation. Share repurchases
would have been much more accretive.
Instead, because of the leverage incurred in service of the
expensive acquisition spree, the Company suspended its share
buyback program. In fact, TEGNA's current leverage is now in excess
of 5x EBITDA and is the highest in its history at what now looks
like exactly the wrong time. In just the past week, S&P
downgraded the Company's credit rating further into junk
status.
THE BOARD HAS JEOPARDIZED OPPORTUNITIES TO MAXIMIZE THE VALUE
OF SHAREHOLDERS' INVESTMENT
Overpaying management for underperformance and overpaying for
acquisitions are troubling enough. The Board's missteps go
further.
In early 2019, as management only recently acknowledged, TEGNA
received a proposal from Apollo Management, a leading private
equity firm with a strategic broadcasting portfolio, to acquire the
Company at a premium.
Not only were those overtures evidently rebuffed, but soon
thereafter, TEGNA announced its largest acquisition: the
$769 million purchase of stations
from Nexstar-Tribune. Half of those stations were acquired from
Nexstar, whose stations generally have higher margins than TEGNA's
and benefit from Nexstar's superior retransmission rates. This
leaves little room for operational improvement. Nevertheless, TEGNA
paid a premium multiple, far in excess of its own trading multiple,
justified publicly on the basis of potential (but we believe highly
unlikely) synergies. A few months later, TEGNA announced another
large acquisition – $554 million for
the stations of Dispatch Broadcasting – at multiples to trailing
EBITDA that have not been disclosed.
In late 2019, TEGNA also chose to refinance its existing bank
loans with an issuance of more than $2
billion of high yield bonds with onerous "no-call"
provisions. This decision will unfortunately cost TEGNA
shareholders hundreds of millions of additional breakage costs in a
scenario where TEGNA is acquired. This was an ill-advised and
unnecessary departure from the Company's traditional indebtedness
profile that had a steady schedule of maturities, rather than
large balloon maturities in later years.
We know from the Company's own disclosures that it has retained
a coterie of high-priced advisors well-versed in corporate takeover
defense. In the fourth quarter alone, TEGNA spent more than
$6 million of shareholder money on
"defense" activities. It seems TEGNA got precisely what it hoped: a
series of acquisitions and debt refinancings that has made an
acquisition of TEGNA substantially more challenging. TEGNA's
increased scale meant additional divestures would be required for
an acquirer to complete an acquisition of TEGNA and the debt
breakage costs mean an acquirer would likely pay less, making an
offer less attractive to shareholders. TEGNA's directors have
seemingly "defended" their own positions and prerogatives at the
expense of reducing the likelihood of a premium takeover
transaction.
But, the greatest disservice to shareholders is what the Board
and management did not do.
We know from TEGNA's subsequent disclosures that TEGNA did
little to engage with Apollo following its expression of interest
in February 2019, and another
overture last June. And, despite TEGNA's efforts seemingly aimed at
discouraging a takeover proposal – the expensive acquisitions and
increased, no-call leverage – several new suitors emerged in the
past few weeks, according to third-party press releases and media
reports. According to press reports, even Apollo reengaged with the
Company, and four interested acquirers expressed interest in buying
TEGNA for $20 per share, a
significant premium.
For weeks, TEGNA refused to make any public statement regarding
its response to third-party expressions of interest. This past
Sunday night, TEGNA acknowledged these expressions of interest for
the first time - in an announcement essentially declaring efforts
to sell the Company are dead. TEGNA claimed it had engaged with two
of these interested parties, and those discussions had ended. TEGNA
also disclosed that it had not engaged with the other two
interested parties, indicating that it had declined to sign
confidentiality agreements with these parties, citing lack of
clarity on financing sources. Following this announcement, TEGNA's
stock fell roughly twenty percent.
Once again, TEGNA's actions call into question the judgment and
motives of the incumbent Board. To insist, amid the disruption
caused by the COVID-19 crisis, that any interested party
demonstrate availability of financing as a pre-condition to
permitting access to information would be off-market in any
environment and particularly so under current conditions. This
approach – like the expensive acquisitions, increased leverage, and
no-call debt features on the recent bonds – appears to be aimed
more at discouraging a deal than truly exploring the strategic
interest these four highly respected and qualified buyers have
expressed.
Had TEGNA moved more quickly and shown the flexibility that is
customary in ordinary times, we believe TEGNA could have converted
the strong interest in a premium-priced acquisition from multiple
credible parties into a deal that would be great for shareholders.
We believe TEGNA's Board could have achieved a fantastic outcome
for shareholders had it actively pursued a strategic transaction
when third-party interest first emerged in early 2019. We believe
the Board should have vigorously pursued a transaction
rather than ignoring interest, "defending", and creating roadblocks
to value.
We recognize that the current market disruption makes a sale of
TEGNA at an appropriate valuation extremely challenging. But it
should never have come to this. It is increasingly apparent that
the TEGNA Board may have squandered the opportunity to maximize the
value of shareholders' investment. For us, the biggest question is
whether that was the Board's intention and its instructions to its
"defense" advisors all along. We intend to review their actions in
this strategic review process. Given the track record of strategic
and operational missteps at TEGNA, it would be ironic if the one
thing this Board did well was to fend off credible suitors.
VOTE FOR CHANGE AT THE UPCOMING 2020 SHAREHOLDER
MEETING
This annual meeting is a referendum on the current Board's
stewardship.
The incumbent Board has presided over a period of persistent
operational underperformance as well as acquisition, capital
allocation and strategy blunders. We believe the Board has failed
to properly, objectively and timely review third-party interest in
acquiring the Company -- and as a result TEGNA may have missed the
window to sell the Company at a premium valuation.
Standard General began engaging with TEGNA in August 2019. We demonstrated our conviction and
commitment to TEGNA by making an investment that is approximately
20x that of the current Board and management, combined. The TEGNA
Board's pattern of missteps over the past eight months represents
an unfortunate continuation of its long-term record of poor
decision making.
We are now convinced that TEGNA will not achieve its potential
unless the Board is upgraded and consists of directors who have
experience in local affiliate broadcasting and are committed to
vigorous oversight of TEGNA's operations, as well as its capital
allocation and strategic alternatives.
WE HAVE NOMINATED EXCEPTIONAL CANDIDATES
Standard General has a history of delivering profitable outcomes
in similarly situated local television broadcasting companies, and
a strong track record of endorsing and executing corporate actions
that create value and benefit all shareholders.
We have nominated four exceptional candidates, each of whom has
substantial local broadcasting experience, both in local affiliate
operations and transformational M&A. I encourage you to read
the enclosed proxy materials, which include detailed biographies of
our nominees, each of whom would bring diversity and significant,
relevant experience to the Board.
Our nominees are committed to maximizing the value of
shareholders' investment in TEGNA, through a rigorous process to
review all of the alternatives, financial, operational and
strategic, available to TEGNA. Our nominees are open to all
alternatives to maximize value, and have the experience and
expertise to help implement changes to TEGNA's business,
operations, capital allocation and strategy to transform TEGNA into
the best-in-class operator we believe it should be – Tomorrow's
TEGNA.
As an owner of TEGNA, your vote in this election
is critical.
It's time for real change at TEGNA. It's time to
start building Tomorrow's TEGNA.
I urge you to vote the WHITE proxy card for
all of Standard General's nominees.
Best Regards,
Soo Kim
Founding Partner
Standard General L.P.
Biographies of Standard General's Nominees (in alphabetical
order)
Colleen B. Brown, 61, is
the founder of Marca Global, LLC, a marketing technology company.
Ms. Brown served as President and Chief Executive Officer of Fisher
Communications, Inc. from 2005 to 2013 and as a director of
Fisher Communications, Inc. from 2006 to 2013. She also served as
Senior Vice President of Belo Corporation, President of the
Television Division of Lee Enterprises, and President and General
Manager of various companies at Gannett Co. Inc. Ms. Brown
currently serves as a director of Big 5 Sporting Goods Corporation
(NASDAQ: BGFV), TrueBlue, Inc. (NYSE: TBI), German-based Spark
Networks, and privately held Port Blakely Companies. She has
previously served as chairperson of the board of American Apparel,
Inc., and on the boards of Career Builder, Classified Ventures, and
DataSphere Technologies. In 2017, Ms. Brown was honored as Director
of the Year by the Pacific Northwest National Association of
Corporate Directors (NACD). Ms. Brown was inducted in 2014 to the
GAMCO Management Hall of Fame. Ms. Brown is also a Henry Crown
Fellow and member of the Aspen Leadership Institute. Ms. Brown
holds a B.S. from the University of
Dubuque and M.B.A. from the University
of Colorado. As a director, Ms. Brown will bring to the
Board extensive executive experience in strategic planning,
operations, finance, and technology. Her leadership as a public
company Chief Executive Officer, as well as a senior officer in two
large media companies, will be a valuable resource to the
Company.
Ellen McClain Haime, 55,
is the Chief Financial Officer of Year Up, Boston, MA, a not-for-profit provider of job
training services. Ms. McClain previously served as Vice President,
Finance of Hearst-Argyle Television, Inc., a publicly-traded
owner/operator of 29 television stations. Prior to her role at
Hearst-Argyle, Ms. McClain served as Senior Vice President, Chief
Financial Officer and Vice President, Corporate Development at
Granite Broadcasting Corporation. Ms. McClain serves on the Board
of Directors of Crane Co. (NYSE: CR), a diversified manufacturer of
highly engineered industrial products. Ms. McClain previously
served as President, Chief Operating Officer, Senior Vice President
and Chief Financial Officer for the New York Racing Association,
Inc., the operator of three of the largest racetracks in
the United States. Ms. McClain
earned a B.A. in Economics from Brown
University and a Master in Business Administration degree
from Harvard University. As a director,
Ms. McClain will bring to the Board extensive financial,
operational and organizational expertise gained as Chief Financial
Officer, Chief Operating Officer, and President of public and
private enterprises.
Soohyung Kim, 44, is the
Founding Partner of Standard General L.P., an investment firm, and
is the firm's Chief Executive Officer and Chief Investment Officer.
Mr. Kim served as a director of New Young Broadcasting Holding Co.,
Inc. and Media General from 2011 to its sale in 2017. Mr. Kim is a
director of Twin River Worldwide Holdings, Inc. (NYSE: TRWH), where
he serves as Chairman of the Board. Mr. Kim was inducted in 2016 to
the GAMCO Management Hall of Fame. Mr. Kim holds an A.B. from the
Woodrow Wilson School of Public and International Affairs at
Princeton University. As a director,
Mr. Kim will bring to the Board significant experience in the
television broadcasting industry as well as extensive M&A
experience and knowledge of the capital markets.
Deborah McDermott, 65, is
the Chief Executive Officer of Standard Media Group LLC. Ms.
McDermott has over twenty years of experience leading broadcast
groups, most recently as Chief Operating Officer of Media General
and as Chief Executive Officer and President of Young Broadcasting.
In these roles, Ms. McDermott served as a key member of the
leadership teams responsible for the successful acquisition and
integration of more than 90 stations. Ms. McDermott is also a
member of the Broadcasting & Cable Hall of Fame and has served
as Chair of the National Association of Television Program
Executives (NATPE), Chair of the ABC Affiliate Board of Governors,
and as a member of the Boards of the National Association of
Broadcasters (NAB) and the Television Bureau of Advertising (TVB).
Ms. McDermott is currently a director of MediaCo Holding Inc.
(NASDAQ: MDIA) and a director of Truxton Trust. In addition, Ms.
McDermott is a member of the board of the Country Music
Association. Ms. McDermott is a graduate of South Dakota State University. As a director, Ms.
McDermott will bring to the Board significant operating experience
in the television broadcasting industry.
About Standard General
Standard General was founded in
2007 and primarily manages capital for public and private pension
funds, endowments, foundations, and high net-worth
individuals. Standard General's extensive experience in local
television broadcasting includes investments in: Media General, a
former publicly-traded broadcasting company now part of Nexstar
Media Group; Standard Media Group, an innovative and diverse media
company committed to high-quality local news; and MediaCo Holding,
a holding company that invests in local broadcast media and radio
stations.
Media General was a publicly-traded broadcaster which, like
TEGNA, had a long tradition in print media, and had divested those
assets to pursue a pure-play broadcasting strategy. As a
substantial shareholder with a single Standard General principal on
the Board, we worked constructively with the management team and
directors to help guide Media General through a merger with
publicly-traded LIN Media LLC 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 in transaction valued
at approx. $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.
If you have any questions, or need assistance
voting your
WHITE proxy card, please contact:
1212 Avenue of the Americas, 24th Floor
New York, NY 10036
Telephone for Banks, Brokers, and International
Shareholders: +1 212-297-0720
Shareholders may call toll-free (from the U.S. and Canada): +1 855-208-8902
Email: info@okapipartners.com
Media
Contact
media@standgen.com
Standard General L.P., together with the other participants in
Standard General's proxy solicitation, has filed a definitive proxy
statement and accompanying WHITE proxy card with the
Securities and Exchange Commission ("SEC") to be used to solicit
proxies in connection with the 2020 annual meeting of shareholders
(the "Annual Meeting") of TEGNA Inc. (the "Company"). Shareholders
are advised to read the proxy statement and any other documents
related to the solicitation of shareholders of the Company in
connection with the Annual Meeting because they contain important
information, including information relating to the participants in
Standard General's proxy solicitation. These materials and other
materials filed by Standard General with the SEC in connection with
the solicitation of proxies are available at no charge on the SEC's
website at http://www.sec.gov. The definitive proxy statement and
other relevant documents filed by Standard General with the SEC are
also available, without charge, by directing a request to Standard
General's proxy solicitor, Okapi Partners LLC, at its toll-free
number 1-855-208-8902 or via email at info@okapipartners.com.
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