September 29, 2015 Last Updated 3:33 pm

Media General shareholder, Starboard, comes out against deal with Meredith Corporation

Letter to the CEO and Board of Directors says Meredith has “a less desirable business mix” compared to Nexstar, which owns no print publishing properties

Print just doesn’t get any respect. Starboard Value LP, a shareholder in Media General, today publicly sent a letter to the CEO and Board of Directors of the company arguing against the deal to acquire Meredith, and in favor of the deal proposed by Nexstar. The reason: the shareholder, which owns 4.5 percent of Media General, doesn’t like Meredith’s product mix (read: print magazines).

Allrecipes-Meredith-300“Effectively, Media General agreed to pay a significant premium to acquire a larger company with a less desirable business mix and then hand over management control to the target’s management team,” the letter argues. “This type of transaction structure is unconventional, at best, and upon closer investigation, appears to be contrary to the best interests of your shareholders.”

The letter, written by managing members Jeffrey C. Smith and Peter A. Feld, argues that even “if the transaction made strategic sense, the valuation does not seem to make financial sense,” claiming that the price is too high for a company so heavily invested in print.

“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.”

Stephen M. Lacy, currently the CEO of Meredith, was slated to become Chief Executive Officer and President of the new Meredith Media General.

On the other hand, Starboard likes the idea of a Media General-Nexstar deal and expressed dismay that Nexstar had previously made a private proposal to Media General.

“We believe a combination of Nexstar and Media General is highly strategic<” the letter states. “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.”

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