The takeover battle between Hollywood producer Burt Sugarman and Media General Inc. grew more heated Wednesday as the newspaper and television conglomerate announced that it had rejected Sugarman's latest proposal as "greenmail."
The company said that Sugarman--through his advisers, Bear, Stearns & Co.--on Monday offered to swap his shares in Media General for a stake in the company's cable-TV systems.
Sugarman quickly denied that he had made such an offer and called Media General's statement a "desperate move to make it appear as though we are losing the proxy contest. In my opinion, this last-minute trick just won't work."
By soliciting the proxies of Class A shareholders, Sugarman and his allies are seeking three seats on the Media General board. Results of the vote will be revealed at the company's annual meeting Friday.
Offered a Deal
Through companies that he controls, Sugarman currently owns 10.1% of Media General's Class A stock and is offering $70 a share, or nearly $2 billion, for the entire company. However, he's been thwarted in his efforts to take over the Richmond, Va., firm because the founding Bryan family controls more than two-thirds of the company's Class B shares, which elect six of the company's nine directors. The Bryan family has said it will not sell its stake in the company "for any price."
Late Wednesday, Media General issued another statement from the company's president, James S. Evans, saying that Sugarman's denial that he made an offer for the cable systems was "an effort to camouflage his attempted greenmail."
"Sugarman offered to end his proxy contest for three seats on Media General's board in return for preferential participation in the equity of a new company owning Media General's cable systems in Northern Virginia," Evans was quoted as saying.
Calls to Sugarman and Media General management were not returned Wednesday. A spokesman for Bear Stearns referred a reporter to another spokesman at the New York public relations firm Kekst & Co. "who can clarify this for you." However, the Kekst spokesman failed to return a number of calls from a Times reporter.
According to Media General, Sugarman proposed to sell his stake in the company's Class A stock for a roughly 43% equity in the company's Fairfax Cable, which has about 163,000 subscribers. Media General said the offer would establish a price for the unit of about $300 million, which it said "would clearly be undervaluing that asset by 50% to 100%." However, according to cable industry experts, the going price for cable-TV systems in recent years has averaged about $2,000 per subscriber, which would mean that Fairfax Cable is worth about $326 million.
In his statement Wednesday, Sugarman reiterated that his $70-per-share offer for all of Media General's outstanding shares is the "only offer on the table."
"I do not make offers through my advisers," he said. "Media General knows that all my offers are made in writing."
Media General's holdings include two daily newspapers, the Tampa (Fla.) Tribune and the Richmond Times-Dispatch & News; three television stations, and the 33 weekly Highlander and Golden West newspapers in Los Angeles and Orange counties.