Setting The New Order At New Media General

When the $1.6 billion Media General-LIN Media merger closes late this year or early next, LIN’s Vincent Sadusky will be running the show even though Media General shareholders will own 64% of the new company.

For Media General, getting the deal done was more important than guaranteeing tenure for its current management. LIN Media shareholders, led by big investments firms, had insisted that Sadusky be put in charge.

Making the management concession was an implicit acknowledgement by Media General controlling shareholders, including Standard General’s Soohyung Kim, that Sadusky’s success in transforming LIN into a leading broadcaster and digital media company is just what the New Media General needs to move beyond its old-school newspaper roots.

“Both companies have run excellent stations, but LIN is on the forefront of digital, both in terms of buying companies and developing services,” says Larry Patrick of Patrick Communications. “There’s also a difference in perspective and seeing where the industry is going.”

“They [Media General executives] were a legacy management team steeped for long time on the newspaper side,” says another industry watcher. “There are a lot of lifers around there.”

According to SEC documents, only Sadusky has an employment agreement with New Media General.

But if recently announced executive suite departures at Media General are any indication, the decks are being cleared for Sadusky to bring in his people.

His people include Richard Schmaeling, SVP and CFO; Robert Richter, SVP, digital; Denise Parent, SVP and chief legal officer; and John “Jay” Howell, VP, television.

Departing Media General executives are led by CEO George Mahoney. As previously announced, he will leave his post when the merger is consummated. Two key broadcast vice presidents — John Cottingham and James Conschafter — are leaving the company at the end of November and December, respectively.

Lou Anne Nabham, VP-corporate communications, also is departing and Robert McPherson, who had been VP-human resources, exited at the end of June.

Mahoney, in a letter to employees that was posted by TVSpy, said 45 positions are being eliminated, many of them currently filled by longtime Media General employees.

The letter did not detail the positions, but a source familiar with the situation said that, in effect, all corporate vice presidents and a number of second-level managers also are losing their jobs.

The fates of two Media General broadcast executives — Deborah McDermott and Robert Peterson — are unclear. Both made the move to Media General with the Young merger.

McDermott, a veteran broadcaster and president of Young Broadcasting since 2004, survived Young’s bankruptcy and the merger with Media General, where she is SVP-broadcast markets.

Peterson, also a veteran broadcaster, joined Young when the company acquired WTEN from Knight-Ridder in 1989. He’s now VP-broadcast markets at Media General.

McDermott is well respected in the broadcast community and industry observers say she appears to have earned Kim’s respect and trust. She could be a good fit for New Media General on the broadcast television operations side, says Bishop Cheen.

“Deb took a bad situation [at Young] and made it better,” says Cheen, an independent analyst and consultant at SNL/Kagan. “She’s a great chief operating officer. She’s done a good job of improving the efficiencies of the Young and Media General stations.”

Before becoming president at Young, McDermott was EVP-operations from 1996 to 2004. When she moved to Media General with the Young-Media General merger, it was not her first stint there. She was station manager at Media General’s WKRN (ABC) in Nashville (DMA 29) from 1986 to 1989. From 1980 to 1996, she was station manager andVP at WKRN.

However, McDermott’s current role would duplicate that of Jay Howell, the top broadcast operations executive at LIN. Howell has risen through the ranks at LIN and was appointed to his position in January 2014 following the retirement of longtime LIN TV boss Scott Blumenthal at the end of 2013.

Howell started with LIN in 2002 as president-GM of WPRI and WNAC Providence, R.I. (DMA 53). He started his broadcasting career at WTOV Steubenville, Ohio, in 1989.

Sadusky’s taking over the leadership of Media General was a key provision in merger negotiations, according to documents filed with the Securities and Exchange Commission. They provide a glimpse of what went on behind the scenes leading to the merger.

In a Feb. 22, 2014, internal meeting to discuss the possible merger, LIN’s Investment Advisory Committee discussed which management team should lead the new company. It determined, in essence, that Sadusky helming the new company would be a key condition to the merger.

“The LIN IAC discussed the importance of Mr. Sadusky leading the combined company following the closing of the transaction, given that a significant portion of the merger consideration to be received by LIN’s shareholders would consist of stock of the combined company and the LIN IAC’s view that Mr. Sadusky’s leadership would best position the surviving entity to perform well in the future.

“The LIN IAC came to a consensus that Mr. Sadusky serving as the chief executive officer … was in the best interests of LIN and its shareholders.”

The three members of the committee are Royal Carson, Douglas McCormick and John R. Muse. All are associated with private equity or other investment firms holding significant stakes in LIN. That committee was responsible for representing LIN in much of the negotiations surrounding the merger.

SEC filings also indicate that Soohyung Kim, principal of the hedge fund Standard General, which owns 30% of Media General, played a key role in the decision making.

Kim acquired a majority interest in New Young Broadcasting as it was emerging from bankruptcy and then engineered the Young-Media General merger. That, in turn, led to the Media General-LIN merger.

Without his approval, Sadusky wouldn’t have received the thumbs-up to run the New Media General and the merger with LIN might have been in jeopardy.

The SEC filings show that if and when key executives are let go from Media General, they’ll have a cushioned landing.

Mahoney’s termination package, which includes cash, equity and benefits, totals nearly $4 million. For James Woodward, CFO, the total is $1.8 million. McDermott’s comes in at roughly $1.3 million, while Conschafter will receive about $1.4 million and Cottingham about $1.3 million.

Sadusky, meanwhile, has a guaranteed three-year term as president-CEO of the New Media General, barring an extraordinary screw-up, according to the SEC documents.

Sadusky cannot be terminated, “other than for cause, without the approval of a majority of the Board of Directors of New Media General, including the affirmative vote of at least one LIN designee. Mr. Sadusky will be a member of the Board of Directors of New Media General, and will be considered a LIN designee.”

Nonetheless, Sadusky and his team have healthy “golden parachutes” should they be terminated.

Sadusky’s package totals $10.2 million; Schmaeling’s, $3.5 million; Parent’s $3.1 million; Richter’s $3.3 million and Howell’s $1.8 million.