Media General Not Planning to Split Up Company, CEO Says
Media General isn’t planning to break up the company, CEO Marshall Morton said during the company’s Q3 earnings call. The vote of confidence in Media General’s business from its CEO was in response to questions from Mario Gabelli, whose investment funds own about 35 percent of Media General’s shares, according to SEC filings. “Where are you in your thinking about taking your bad assets and good assets and dividing them up and assigning debt to those,” Gabelli asked.
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"We have not looked at breaking the company into pieces,” Morton said. “We have looked at how to get more out of the markets that we're serving. It’s in my thinking right now that the best way to get value for the company is addressing the market potential, particularly in the side that has the most potential, which is digital and mobile."
Gabelli questioned if Media General’s strategy of organizing its operations by markets rather than by medium was still valid or whether shareholders would be “better off having the company split into different parts or perhaps taking the sum of your assets and monetizing them?” Morton defended the company’s strategy: “We're getting more out of our markets by being able to sell all three platforms to all of our markets,” he said. Gabelli also asked whether the company has consulted with bankruptcy attorneys. It hasn’t, Morton said.
Media General executives are focused on maintaining compliance with their debt covenants, which call for a lower debt-to-earnings ratio before Jan. 1, 2012, Morton said. The company is also working hard to refinance some debt due 2013, he said. “We are very focused in getting the ‘refi’ done,” despite the fact that the capital markets are “seized up right now,” he said. “We do not believe it’s in the best interest of shareholders to refinance at any cost."
The recent sale of McGraw-Hill’s TV station group to Scripps could spur Media General to consider shedding some assets, Morton said. “Sure, it got our attention,” he said. He estimated that the larger-market stations in the deal sold for more than 10-times cash flow, he said. That’s a higher valuation than stations had been getting in recent years he said. “It’s a different world if people view cash flow at 10 times than if they view it at four to six,” he said. “Every asset we hold is a shareholder value question. If we see somebody who wants to value it more highly than we do or generate more value for us than the station itself would, then we'd have to think about it."
Q3 sales at its TV stations fell 13 percent from a year ago to $65.1 million on lower political ad sales. Excluding political, broadcast sales were down 2.4 percent, the company said. And Media General’s TV stations are on pace to sell 9-11 percent more in non-political ads during Q4 than they did a year earlier, the company said. Moreover, with South Carolina having moved its presidential primary up, stations in that state might see political ad sales this year, executives said.