Institutional Investors Release Letter To John W. Kluge, Chairman of Metromedia International Group, Inc; Urge Actions to Increase MMG Shareholder Value
NEW YORK, Jan. 6 /PRNewswire/ -- Elliott Associates, L.P. and Westgate International, L.P. today released the text of a letter sent to John W. Kluge, Chairman of Metromedia International Group, Inc. (Amex: MMG - news). Elliott and Westgate, institutional investors under common management, collectively own approximately 2.1 million shares of MMG'scommon stock.
In its letter, Elliott and Westgate express their concern over MMG's lagging stock performance and urge MMG's Board of Directors to consider and implement a number of steps to increase shareholder value. The text of the letter follows:
January 5, 2000
Mr. John W. Kluge
Chairman of the Board of Directors
Metromedia International Group, Inc.
One Meadowlands Plaza
East Rutherford, NJ 07073
Dear Mr. Kluge:
Elliott Associates, L.P. and Westgate International, L.P. are
institutional investors under common management that own approximately
2.1 million shares of Metromedia International Group, Inc. ("MMG" or the
"Company") common stock, ranking us among the Company's largest
institutional shareholders. We are writing to express our deep concern
with the Company's failure to enhance shareholder value and what appears
to us to be a lack of responsiveness to shareholders. We have attempted
on a number of occasions to formally articulate our concerns to President
and CEO Stuart Subotnick but to date have been unsuccessful, which compels
the public release of this letter.
We are highly frustrated at the Company's abysmal stock price performance
in recent years, especially in comparison to the stock price performance
achieved by other emerging market telecom companies with exposure to
Russia and Eastern Europe. While the stock price of MMG decreased 13% in
1999, the stock prices of Rostelecom (ROS), Telesystem International
Wireless Inc. (TIWI), and Vimpel Communications (VIP) increased 306%,
201%, and 245%, respectively, in 1999. Further, the Company's stock price
has also failed, by a wide margin, to keep pace with more general market
measures such as the S&P 500 Index and the NASDAQ Telecommunications
Index, which increased 19% and 103%, respectively, in 1999.
We believe that the Company has an intrinsically valuable franchise and
stable of assets. We also believe that there are a number of steps that
can be taken now to increase shareholder value. As such, we strongly urge
the Company's Board of Directors to consider and implement the following
as soon as possible:
1. Share Buy-Back: Up to $40 million in cash should be allocated for the purpose of buying back MMG shares in the open market. According to the Company's 10-Q for the period ended September 30, 1999, the Company had $62 million in cash as of September 30, 1999. On December 13, 1999 the Company announced in a press release that its majority-owned subsidiary Metromedia China Corporation ``expects ultimately to receive approximately US$90 million' in cash. At its current stock price of $4.44, MMG is down 75% from its recent high of $17.88 in April of 1998. The Company should take advantage of its current cash position and low stock price to reduce the number of shares outstanding.
2. China E-Commerce IPO: An initial public offering (IPO) of the Company's e-commerce interests in China should be effected. According to the Company's 10-Q for the period ended September 30, 1999, the Company, through Metromedia China, had a 49% ownership interest in a joint venture to develop and operate e-commerce systems in China. The 10-Q further states that ``the Company is currently reviewing other similar investment opportunities in China in the e-commerce sector.' In light of the high valuations being afforded Chinese internet companies such as China.com (CHINA), an IPO of the Company's Chinese internet assets may unlock additional value for the shareholders of the Company.
3. Snapper Sale or Spin-Off: An investment bank should be retained to conduct the sale or spin-off of the Company's Snapper Inc. subsidiary. The Company admits in its most recent proxy statement that it ``views Snapper as a non-core asset and manages it in order to maximize shareholder value.'
We concur with the Company's conclusion and further believe that Snapper's
presence obscures the true underlying value of the Company's numerous
telecommunications properties. Accordingly, the Company should promptly
take action to sell or spin-off Snapper in an effort to maximize
shareholder value.
We remain willing to discuss our recommendations with you or the Board of
Directors. We firmly believe that taking these steps would be consistent
with the goal of delivering increased value to the shareholders of the
Company.
Sincerely,
ELLIOTT ASSOCIATES, L.P.
WESTGATE INTERNATIONAL, L.P.
cc: The Board of Directors of Metromedia International Group, Inc.
Mr. K. Rupert Murdoch, Chairman and CEO of The News Corporation
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