Industrialist and Hollywood producer Burt Sugarman fired the opening salvo Monday in what may become a protracted battle for Media General, a family controlled newspaper and television empire based in Richmond, Va.
Sugarman, who has already accumulated slightly less than 10% of Media General's publicly traded common stock, proposed a $1.8-billion merger with two public companies that he controls, Barris Industries Inc. and Giant Group Ltd. But he drew a quick rebuff.
The Sugarman companies would pay $61.50 per share, about 40% above current market value, for each share of Media General, Sugarman informed Media General Chairman D. Tennant Bryan in a letter. Sugarman said he and his financial advisers, Bear, Stearns & Co., were "highly confident" of obtaining the necessary financing for the offer.
Less than an hour after the letter was publicly released, however, Bryan's family--which controls the board of the firm through a 71% stake in its Class B stock--announced its rejection of the proposal.
"Our interests in Media General are not for sale for any price," the Bryans said.
Media General's shares rose $2.375 to close at $46.25 a share Monday on the American Stock Exchange. That was a 12-month high for the stock.
Sugarman said later that he it is "grossly unfair" that the Bryan family's holding of Class B stock--which despite its voting strength amounts to just 2% of all Media General shares outstanding--could reject such an offer without regard for the wishes of other shareholders.
Media General, whose holdings include the 300,000 daily circulation Tampa (Fla.) Tribune and the 250,000 daily circulation Richmond Times-Dispatch & News, three television stations and the 33 weekly Highlander and Golden West newspapers in Los Angeles and Orange counties, has been led for more than 55 years by its chairman, who is 81.
He and his son, J. Stewart Bryan III, who also is a director, own a total of 11.5% of the Class A stock, which is traded on the American Stock Exchange. The family trust owns 66.7% of the closely held and much less traded Class B stock, and family members control another 4.6%, for a 71.3% total. The family includes two other grown children of the chairman.
Media General has been considered by many analysts to be virtually impregnable to unwanted suitors because of the unequal voting power of its Class B stock, which elects 70% of the board. Analysts cite the Los Angeles Times, the Washington Post, the New York Times and the Wall Street Journal among big newspapers whose parent firms have similar multiple stock classes that function as a defense against hostile takeover.
In addition, the Bryan family last year set up a trust with a number of provisions designed to help the Bryans retain control of the company's Class B stock after the death of current chairman by making it difficult for the heirs to sell.
Generally, media analysts interviewed Monday said they did not see how Sugarman or anyone else could wrest control of Media General from the Bryans if they do not choose to sell their stock.
But several observers said Sugarman might be able to get himself elected to the company's board by holders of its Class A stock, much of which is held by institutional investors. Class A shares are entitled to elect 30% of the nine-member board.
Once on the board, according to one theory, he might be able to "shake things up" and try to force the sale of the company's assets, whose breakup value is estimated to be worth as much as $80 per share.
The 49-year-old Sugarman declined to say what his next step will be but said in a telephone interview: "We are not going to go away. We will stay there and continue to come at the company. It may take a month. It may take three months. It may take a year or 10 years."
He noted that Barris and Giant Group have invested more than $100 million to accumulate their current 9.8% interest in Media Group's Class A shares, adding that he and his associates are "emotionally committed" to the battle.
In an amended filing Monday with the Securities and Exchange Commission, Barris and Giant Group said their new proposal signals their intention to acquire control of Media General.
If the firm's directors and shareholders did not approve the merger proposal, it said, Barris and Giant Group "would seek other means of obtaining, participating in or influencing the control of the company."
These means could include a proxy contest for election of those directors elected by Class A stock, the filing said.
Sources close to Sugarman hinted that a stockholder lawsuit, which might allege breach of fiduciary duty by management, also is a potential weapon in his arsenal.
Sugarman, a creative force in the entertainment business (he produced the recent films "Children of a Lesser God" and "Crimes of the Heart"), also has proved himself to be an astute businessman.
In recent years, he has shifted millions of his Hollywood earnings into such non-glamorous businesses as cement and forklift trucks.