January 21, 2020 / 3:34 PM / 6 months ago

Exclusive: Hedge fund HG Vora wants Tegna to consider a sale or merger - sources

BOSTON (Reuters) - Another large investor in Tegna Inc (TGNA.N) wants the U.S. regional TV station operator to pursue a merger or sale, arguing a tie-up could be very valuable at a time the industry is facing a wave of consolidation, two people familiar with the matter said.

Hedge fund HG Vora Capital Management, which owns about 4% of Tegna’s stock, is the third investor to push for changes at Tegna. Standard General has laid the groundwork for a proxy contest and Donerail also wants changes to be made.

HG Vora, which oversees $5.3 billion in assets, could not be immediately reached for comment.

Standard General, which owns 9.7% of Tegna shares, last week said that it plans to nominate four directors to the company’s 11-member board, including Soohyung Kim, Standard General’s founder and portfolio manager.

Talks between Tegna and Standard General about board seats have faltered with the company saying publicly that it has “serious concerns (about Kim’s) prior business and board service.” Tegna said it will evaluate Standard General’s three other nominees.

HG Vora, run by Parag Vora, is likely to be supportive of Standard General’s board nominees, one of the people said.

Over the last five years, Tegna’s stock price has climbed 14%, compared with a 65% gain for the S&P 500 index. Over the last year, however, the company’s stock price has surged 55%, compared with a 26% gain by the S&P. The company’s share price began moving higher late last year.

Standard General converted its 13G filing, made in August, to a 13D filing on September 30. In a 13D filing investors who have purchased more than 5% of a company lay out their intentions, that may include pursuing changes at the company.

On Tuesday Tegna was off 1.6% to trade at $17.77.

Vora has experience in the media industry, having purchased a stake in Tribune Media which was bought by Nexstar Media Group (NXST.O) last year for a 30% premium.

Last year, the New York-based hedge fund delivered an 11.4% gain to its investors.

Separately on Tuesday Tegna released a letter to its shareholders saying it will consider all ways to boost returns.

The company and hedge fund Standard General have already sparred possible takeover approaches and who might have wanted to make an offer.

Standard General wrote last week that the company appears to have a rebuffed “an acquisition proposal at a premium valuation from a credible buyer.”

On Tuesday the company said that private equity firm Apollo approached Tegna twice last year - in February and June - but that no price was discussed and no firm offer was made.

In June, Apollo approached Tegna so that Tegna could buy Cox Media Group from Apollo, the letter said, noting that Tegna felt its shareholders would not benefit from such a move.

The company also said it is positioned for strong returns and expects to benefit from election-year advertising. “In 2020 alone, we expect Tegna to capture at least $300 million in high-margin political advertising revenue,” the letter said.

Interactions between Tegna and Standard General, one of the company’s biggest investors, have taken on an unusually tense tone, analysts said. Both sides last week made public statements about qualifications and commitments.

Tegna, based in Tysons, Virginia, has a market capitalization of $3.7 billion and was created in 2015 when Gannett Company split into two publicly-traded companies. It owns 62 stations in 51 markets and says it reaches 39% of all television households nationwide.

Reporting by Svea Herbst-Bayliss; Editing by Nick Zieminski

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