Sun-Times Media Group: Hedge Fund Raiders Don’t Have A Clue About Newspaper Business

Fitz: In the latest salvo in its proxy war with Davidson Kempner Capital Management, the Sun-Times Media Group (STMG) is telling stockholders in a letter Wednesday that the activist hedge fund offers nothing more than “wishful thinking” to turn around the troubled parent of the Chicago Sun-Times.

“DK glibly suggests three extremely broad-and obvious-approaches to accomplish this goal,” the letter from the board says. “They have not provided any detail for their broad assertions that would permit you or your duly elected board of directors to evaluate whether any new ideas, strategies or tactics are contemplated.  Their objective to ‘revitalize’ or ‘reposition the company’ constitutes nothing more than wishful thinking.” By contrast, the board says, STMG is now in its second round of cost cutting to wring out another $50 millon of expenses to become cash flow neutral in the next year or two.

In its own missives to shareholders, Davidson Kempner has portrayed the current board as a feckless group that has allowed the company to burn through cash at a rate of $20 million a quarter, setting it on the path to bankruptcy before the end of next year.

Davidson Kempner suggests its new board would undertake “more dramatic” cost-cutting, “more aggressive” negotiations with the IRS to resolve a $600 million tax claim related to under-reporting of income during the Conrad Black era, and a better effort at finding “unexploited opportunities in community newspapers, online publishing, and community internet sites.” Among its nominees for a new board is Jeremy L. Halbreich, the former president and general manager of The Dallas Morning News and founder of American Consolidated Media.

The STMG board letter says Halbreich and other nominees have “remained entirely silent” about their ideas for the company.