NEW MEDIA INVESTMENT OPERATOR CRITICIZED.
A private investment management firm fired a shot across the bow of Fortress Investment Group LLC, the company that controls and operates the newspaper publishing firm New Media Investment Group Inc., last week.
On Tuesday John Levin, chairman and chief executive of Levin Capital Strategies L.P., sent a letter to Wesley Edens, chairman of New Senior Investment Group Inc., one of the three businesses spun off from Newcastle Investment Corp. last November (one other was New Media Investment).
Though publicly traded, New Senior, New Media and Newcastle are all businesses that are majority owned and controlled by Edens through his Fortress company. In fact, New Media's chief executive, Michael Reed, is a Fortress employee and does not work for New Media.
This type of structure, said Levin, "is one that can lead to serious conflicts of interest." He went on to say, "As the chairman of each of these companies, [Edens has] a fiduciary duty to their public shareholders, and that duty conflicts with your role at Fortress and specifically with Fortress' desire to raise capital in these vehicles to increase its fee streams."
Levin pointed out that all these companies are trading down from their 52-week highs, with New Media Investment off "30.6 percent, as compared with the S&P 500 decline of nine percent."
New Media Investment was launched out of last year's bankruptcy of GateHouse Media Group Inc.; Fortress and Edens had controlled GateHouse as well and Reed had been GateHouse's founding chief executive.
The New York City publisher now has 126 daily papers in 460 markets across 32 states, including Ohio's Columbus Dispatch and Nevada's Las Vegas Review-Journal. Shares in New Media Investment were up 5-1/2 percent last week, closing on Friday at $15.83.
Levin is calling for Edens and Fortress to separate management of these companies, which will force the chief executives like Reed to focus on all the shareholders, not just Edens. Additionally, Levin wants more independent directors. He'd also like his money back, but he didn't say that in his letter.