Amid the chaos of the COVID-19 pandemic, a handful of proxy contests have trundled on, seemingly oblivious to the surrounding turmoil. One such battle is Standard General’s fight with U.S. broadcaster Tegna. The scrap over four board seats – one-third of those up for grabs – will become the first contested shareholder meeting to be virtual-only later this week, on April 30.

Soohyung Kim’s New York-based fund has called for operational and strategic changes at Tegna, claiming poor decision making by its board resulted in the company’s underperformance and a share price at a five-year low as of April 23. Tegna, meanwhile, argues Kim’s proxy contest is a thinly-veiled push to sell the firm.

Indeed, when Standard General disclosed its intention to play an active role at the company last September, it touted its “successful track-record of overseeing acquisitions, mergers, and sales processes of publicly-listed television broadcasting companies,” and as recently as March 20 it issued a press release calling on the company to “vigorously” pursue takeover offers.

Primetime

Finding common ground on the board’s track record is tricky. Tegna has argued that it outperformed the S&P 500 Index on a one- or two-year basis, while Standard General points out that it has underperformed since the split in 2015.

Much of the momentum has been external, however. Following a reported bid by private equity firm Apollo Global Management in August last year, the stock surged from $13.61 to $15, and the start of Standard General’s proxy contest sent it above $18 for the first time in two years

In any case, shares began plummeting as the COVID-19 pandemic scared off buyers and have now given up all its gains of the last two years.

To understand why M&A has been such a prominent backdrop, since early March Tegna has received four buyout offers, each reportedly worth $20 per share. Two were given access to Tegna’s books and records but subsequently withdrew their interest, while the others had not provided financing commitments when Tegna last communicated their interest to the market at the end of March

Standard General believes the leaks were borne out of frustration with the way the broadcaster’s board approached the interest and “roadblocks” thrown up by the board.

“When a strategic bidder leaks their interest, that signals extreme frustration with a company,” Kim explained. “It’s considered the last resort to appeal to shareholders directly.”

Following Tegna’s confirmation that two offers had been withdrawn at the end of March due to volatility in the market, Standard General called on shareholders to see the April 30 annual meeting as a “referendum,” on the board’s stewardship.

Deal or no deal

The campaign highlights the challenge faced by activists who have been pushing targets to sell themselves, only to see the window for mergers and acquisitions closed, at least for the foreseeable future, by the pandemic.

Some transactions, such as the planned acquisitions of Victoria’s Secret and Moss Bros., have been thrown into doubt amid mass store-closures due to the COVID-19 pandemic. Others, like Ancora Advisors’ campaign at J. Alexander, Driver Management at Community Bankers Trust or Elliott Management’s investment at Evergy, have seen grudging truces acknowledging that now may not be the time for selling assets.

Standard General argues that the contest has never been solely about a transaction and that there are plenty of operational changes the company could make. It has so far turned down Tegna’s attempts to settle the contest because of the company’s precondition that Kim not be considered for a board seat. “It wasn’t a big ask,” Kim told Activist Insight Online, adding that Tegna has since “spent millions of dollars fighting a very reasonable ask.”

Now, with the company responding that Kim has offered “no specific ideas to create value – only statements that if he were on the board, he would have a unique ability to source and execute ‘transformative’ M&A,” it seems as though both sides are committed to seeing this proxy fight through to the end.

Talking heads

As Tegna’s annual meeting draws closer, proxy voting advisers Glass Lewis and Institutional Shareholder Services (ISS) threaten to tip the balance away from Standard General.

ISS gave its blessing only to Colleen Brown from the activist’s slate, voicing concern over the independence of Ellen Haime and Deborah McDermott and claiming that Kim’s pursuit of a “suboptimal deal” while sitting on the board of Media General, which was sold to Nexstar Broadcasting Group in 2017 for cash and stock, was “directly relevant” to his campaign at Tegna.

Kim had favored a competing cash and stock offer from station and magazine owner, Meredith, though Nexstar’s offer was viewed as the superior deal. ISS judged that Kim’s apparent focus on M&A at Tegna “seems to outweigh the potential benefit of his personal involvement in this case.”

Glass Lewis, meanwhile, argued that Standard General had made “several unverifiable or flatly false allegations,” and advised shareholders to “place their confidence” in the firm’s current strategy.

“People have said I’m pushing for a sale of the company,” Kim lamented.“That’s not true.” In addition, Kim believes accounts of the Media General deal misrepresent him. “I don’t have a history of flipping companies,” he contended, “I have a history of growing and merging companies.”