Sugarman Lifts Media General Stake to 10.1%

In an attempt to turn up the heat in his hostile takeover attempt, Hollywood producer-entrepreneur Burt Sugarman said Thursday that he has raised his stake in Media General to 10.1%. He also contended that, under the company’s charter, the family that controls the smaller of Media General’s two classes of stock could not block his $1.8-billion merger proposal.

However, James S. Evans, president of the Richmond, Va., newspaper and television empire, said its lawyers “found Sugarman’s legal reasoning incorrect.” Under Virginia law, any merger requires approval by two-thirds of each class of stock, Media General held.

The company’s reaction apparently put the ball back in Sugarman’s court. On Feb. 29, he had proposed a merger in which $61.50 a share would be paid for all Class A and Class B stock of Media General. By comparison, the market price of the shares then was $43.875.

Media General responded that the 71% interest in Class B stock owned by the family of Chairman D. Tennant Bryan was not for sale “at any price.” The firm’s shares closed Thursday at $47, up 50 cents, on the American Stock Exchange.

Sugarman held just under 10% of Media General’s Class A stock when he made the proposal, in which two companies that he controls--Barris Industries Inc. and Giant Group Ltd.--would be folded into Media General, which would be the survivor of the reverse merger. Sugarman’s stock in Media General is held by Barris and Giant Group, both based in Beverly Hills.

As explained by Sugarman’s New York attorney, Edward Brodsky, Media General’s charter provides that Class A and B stockholders vote together to approve an acquisition of stock or assets of another company involving a holder of at least 10% of Media General’s stock.

Media General’s own New York attorney, Arthur Fleischer, said the provision cited by the Sugarman camp does not supersede Virginia law, which mandates a separate two-thirds vote by each class of stock.

Meanwhile, Sugarman reported in an amended SEC filing Thursday that his group may solicit proxies from other Class A shareholders of Media General for election of directors representing that class of stock “as a means of obtaining, participating in or influencing the control of Media.”

Holders of the firm’s 27.7 million Class A shares are entitled to elect only three of its 10 directors. Holders of the 560,000 Class B shares elect seven directors. As in the case of some other family-controlled newspaper companies, the two-class arrangement functions as a defense against an unwelcome takeover.

In his message Thursday to Media General, Sugarman said that, under a change in the charter last year, the Bryans could keep 70% voting control with a single share of Class B stock by choosing to convert the rest to Class A shares.

This change was made, he charged, to permit the Bryan family to sell Class A shares and “reap the cash benefits of their equity position and yet maintain the same disproportionate voting rights they had before.” This was “hardly a valid corporate purpose,” he added.

David L. Jordan, a Media General vice president, commented that the provision was approved by more than two-thirds of the stockholder votes cast. And attorney Fleischer said that the proxy material for last year’s vote noted that the purpose of setting up a Bryan family trust and taking other steps was to maintain the family’s control of the company.

The family founded the Richmond Times-Dispatch & News, which has a daily circulation of 250,000, and the company has been led for more than 55 years by its 81-year-old chairman. Media General also owns the Tampa (Fla.) Tribune, with a daily circulation of 300,000; three television stations, and the 33 weekly Highlander and Golden West newspapers in Los Angeles and Orange counties.