Hedge Fund Ousts Board At Chicago Sun-Times

Jan 20 2009 | 2:05am ET

A New York hedge fund has won its proxy battle with the second city’s second newspaper.

On Friday, Davidson Kempner Capital Management said it had won approval of its plan to oust several members Sun-Times Media Group’s board of directors. The activist hedge fund, which owns 5.9% of the troubled publishing company, said it had received and delivered the required number of consents from a majority of shareholders to replace three board members. Davidson Kempner said it wants the new board to replace Sun-Times Media CEO Cyrus Freidheim.

Sun-Times Media publishes the Chicago Sun-Times and dozens of local newspapers in the Chicago area.

Only one member of Sun-Times Media’s board is to be spared: Robert Poile, representing fellow hedge fund Polar Securities. The new members of the company’s board are Jeremy Halbreich, former general manager of the Dallas Morning News, and two business restructuring specialists, Michael Katzenstein and Robert Schmitz.

“Through the provision of these consents, the stockholders have made clear their desire and support for a board of directors that is made up of professionals experienced in publishing and restructuring,” Davidson Kempner said in a statement. “Given the operating and financial challenges before Sun-Times, we believe that the reconstituted board has the better potential to guide and lead Sun-Times.”

For its part, Sun-Times Media said it would hire an independent inspector to verify the consents “purporting to effect the reconstitution of the company’s board of directors.”

Davidson Kempner has railed against the company’s board and management, laying at their feet the blame of its huge losses and terrible stock performance. Sun-Times Media’s share price of 8 cents values the company at less than $7 million.

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