Gate City Withdraws Nominees from Saga's Board

RADIO ONLINE | Thursday, March 27, 2025

Saga Communications

Gate City Capital Management (Gate City), in a surprising move, has officially withdrawn its nominees for election to the board of Saga Communications. The withdrawal was formalized in a letter dated March 26, 2025, addressed to Saga's corporate secretary, indicating a significant shift in the investment firm's approach to its involvement with the media company.

Michael Melby, the founder and portfolio manager of Gate City, expressed concerns about Saga's ongoing digital transformation strategy, which he believes has adversely impacted the company's financial stability and operational focus. According to Melby, this strategy has diverted resources from Saga's core broadcast business, which he argues has established competitive advantages and historically high incremental margins.

Financial Performance and Strategic Concerns Gate City's decision to pull its nominees came after a detailed analysis and extended discussions with Saga's senior leadership. The investment firm highlighted a stark decline in Saga's financial performance, noting a significant drop in station operating income and profitability, particularly during a presidential election year when higher political spending should have buoyed the company's results.

Melby criticized Saga's digital transformation for not providing clear financial targets or metrics and argued that the strategy lacks the necessary expertise and competitive edge required for success in the highly competitive digital advertising space. He also pointed out the considerable increase in corporate expenses and questioned the executive leadership's proximity to Saga's operational heart, raising concerns about effective management and oversight.

Recommendations and forward-looking statements despite withdrawing its board nominees, Gate City remains invested in Saga and has outlined several recommendations to enhance shareholder value. These include divesting non-core assets, like Saga's owned residential property in Sarasota, Florida, and reevaluating the company's excessive cash balance, which Gate City views as a conservative approach that could hinder proactive business strategies.

Additionally, Melby's letter hints at a continued engagement with Saga, emphasizing the need for a refreshed approach to the board's composition and strategic direction. He suggests a more diversified search for new board members that extends beyond just digital expertise to address broader operational and strategic needs.