SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No. 1)
UNDER THE SECURITIES AND EXCHANGE ACT OF 1934*
Saga Communications, Inc.
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(Name of Issuer)
Class A Common stock
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(Title of Class of Securities)
786598102
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(CUSIP Number)
Peter C. Keefe
Avenir Corporation
1725 K St NW
Suite 401
Washington DC, 20006
(202) 659-4427
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 2, 2006
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(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d?1(e), 13d?1(f) or 13d?1(g), check the
following box: [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 240.13d?7 for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
SCHEDULE 13D
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CUSIP No. 786598102 Page 2 of 8 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Avenir Corporation
I.D. No. 54-1146619
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
NUMBER 1,486,062
OF SHARES ------------------------------------------------------------
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER
EACH 0
REPORTING ------------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
1,486,062
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10 SHARED DISPOSITIVE POWER
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
1,486,062
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.21%
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14 TYPE OF REPORTING PERSON*
IA
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SCHEDULE 13D
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CUSIP No. 7865981 Page 3 of 8 Pages
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This Amendment No. 1 to Schedule 13D ("Amendment") is being filed on behalf of
Avenir Corporation ("Avenir"), a Virginia corporation and amends the original
Schedule 13D filed on March 14, 2006 on behalf of Avenir. This Amendment relates
to the common stock, par value $0.01 per share, of Saga Communications, a
Delaware corporation (the "Issuer"). Unless the context otherwise requires,
references herein to "Securities" or "Shares" are to such common stock of the
Issuer.
Item 3. Source and Amount of Funds or Other Consideration.
The Securities of the Issuer were primarily acquired on behalf of the
investment advisory clients of Avenir under sole or shared discretionary
authority granted Avenir. In addition, Avenir and/or its principal officers
and employees purchased Shares in the Issuer for their personal accounts. The
aggregate amount of funds used to purchase the Securities reported in this
filing totaled approximately $19,670,021. In addition, none of the proceeds
used to purchase the Securities were expressly provided through borrowings,
though certain accounts managed by Avenir may carry margin balances from time
to time.
Item 5. Interest In Securities Of The Issuer
(a) The aggregate number and percentage of Securities to which this
Schedule 13D relates is 1,486,062 shares of the common stock of the Issuer,
constituting approximately 8.21% of the 18,098,028 shares outstanding.
(b) Avenir generally has the sole power to dispose of or to direct
The disposition of the Securities held for discretionary accounts of its
investment clients, and may be granted the sole power to vote or direct the
vote of such Securities; such powers may be retained by or shared with the
respective clients for shared or non-discretionary accounts, for which Avenir
generally makes recommendations with respect thereto.
(c) All purchase or sale transactions in the Securities during the
past sixty days are set forth on Schedule I.
(d) The investment advisory clients of Avenir have the sole right to
receive and, subject to notice, to withdraw the proceeds from the sale of the
Securities, and the sole power to direct the receipt of dividends from any of
the Securities held for their respective accounts. Such clients may also
terminate the investment advisory agreements without penalty upon appropriate
notice.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer
The powers of disposition with respect to Securities owned by discretionary
private accounts of Avenir are established in written investment advisory
agreements between clients and Avenir, which are entered into in the normal
and usual course of the business of Avenir as a registered investment advisor
and which are generally applicable to all securities purchased for the benefit
of each such discretionary private account. There are no special or different
agreements relating to the Securities of the Issuer.
The written investment advisory agreements with clients do not contain
provisions relating to borrowing of funds to finance the acquisition of the
Securities, acquisition of control, transfer of securities, joint ventures,
or any of the other transactions listed in the instructions to Item 7 of
Schedule 13D other than voting of proxies. In connection with voting, Avenir
may be allowed or directed to vote the proxies received by accounts classified
as "discretionary" or "shared" accounts; such authority is generally retained
by the clients for accounts classified as "non-discretionary".
SCHEDULE 13D
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CUSIP No. 786598102 Page 4 of 8 Pages
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Item 7. Material to be Filed as an Exhibit
1) Schedule I. Purchase and sale transactions within the past 60 days.
2) Letters
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
May 2, 2006
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Date
/s/ Peter C. Keefe
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Signature
Peter C. Keefe,
President
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Name/Title
SCHEDULE 13D
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CUSIP No. 786598102 Page 5 of 8 Pages
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SCHEDULE I
PURCHASE ("by") AND SALE ("sl") TRANSACTIONS WITHIN PAST 60 DAYS
All purchases and sales listed below were normal, open-market transactions.
Transaction
Average Per
Type Security Date Quantity Total Price Share
sl Saga Communications Inc 3/17/2006 1100 $10,122.68 $9.20
by Saga Communications Inc 3/20/2006 1000 $9,060.95 $9.06
by Saga Communications Inc 3/23/2006 4500 $40,590.00 $9.02
by Saga Communications Inc 3/27/2006 5340 $48,417.00 $9.07
by Saga Communications Inc 3/28/2006 600 $5,412.00 $9.02
by Saga Communications Inc 4/4/2006 1200 $10,818.00 $9.02
by Saga Communications Inc 4/5/2006 11100 $100,104.26 $9.02
by Saga Communications Inc 4/6/2006 23100 $206,910.00 $8.96
by Saga Communications Inc 4/7/2006 1800 $16,227.00 $9.02
sl Saga Communications Inc 4/7/2006 1800 $16,172.50 $8.98
by Saga Communications Inc 4/11/2006 4200 $37,568.00 $8.94
sl Saga Communications Inc 4/20/2006 4200 $38,194.02 $9.09
VIA MAIL
Mr. Edward K. Christian
Chairman
Saga Communications, Inc.
73 Kercheval Avenue
Grosse Pointe Farms, Michigan 48236
May 1, 2006
Dear Ed,
Our letter of March 21 to you with copies to the Presiding Director and full
board of directors remains unacknowledged by you or the Presiding Director. In
summary, our letter contained a recommendation that the board undertake a major
share repurchase funded through the sale of our broadcast television business.
The reasons for doing so are detailed in the attached copy of our March 21
letter, which we presume has been distributed to all directors per the
instructions provided in your 2005 proxy statement.
Your decision not to respond is regrettable for many reasons. First and
foremost, the letter focuses exclusively and constructively on ways in which
Saga Communications can enhance intrinsic value per share while strengthening
the entire enterprise. You would be the single largest beneficiary. It is
also regrettable because it signals the board's disinterest in value creation
and perhaps its failure to grasp basic capital allocation issues.
Unfortunately, recent SEC filings indicate that instead of shrinking Saga's
equity base, you have done the opposite. With Saga's shares recently
approaching a ten-year low, the board approved more than 300,000 stock options
and 70,000 restricted shares, representing further dilution equal to 1.9% of
the shares previously outstanding. These, and others, were granted to a group
of employees and directors ? you included. Several are grantees who have
flipped Saga options over the past several years. The cycle of grant-sell-
repeat destroys per share value and it is your committed, long-term
shareholders who absorb the costs of this dilution.
Diluting your existing, long-term shareholders at a historically low price is
poor capital allocation and poor corporate governance. Refusing to consider
accretive, value creating proposals such as those put forth in our March letter
is perplexing.
Since you control the board, responsibility for change rests with you alone.
Nonetheless, the directors you personally elect owe Class A shareholders a
fiduciary duty. They must remain mindful of this responsibility. We regret
that we cannot support this board of directors and will not vote for them on
our May 15th proxy.
We remain committed to Saga Communications and the pleasant relationship we
Have enjoyed with management. In the interest of maximizing the long-term per
share value and health of the business, we again respectfully request that you
and the board give very serious consideration to the issues we have raised.
Very truly yours,
Peter C. Keefe
President
Cc: Donald Alt, Presiding Director for distribution to all board members
VIA MAIL
Mr. Edward K. Christian
Chairman
Saga Communications, Inc.
73 Kercheval Avenue
Grosse Pointe Farms, Michigan 48236
March 21, 2006
Dear Ed,
Avenir Corporation controls approximately 1.4 million shares, or nearly 8%, of
Saga Communication's Class A stock. Per the flexibility permitted us under our
Form 13-d on file with the Securities and Exchange Commission, we are using
this letter to request that Saga's board of directors undertake specific
actions that would immediately enhance the long-term, intrinsic value of each
share.
Saga's television business has destroyed shareholder value and should be sold
To provide partial funding for a large share repurchase. Saga's 2005 Form 10-k
indicates $31 million in television assets on the books. Over the past three
years, Saga's television business has generated cumulative cash flow of $9.1
million but has consumed capital expenditures of $8.9 million, meaning we have
achieved no return on our $31 million investment.
While Saga's radio cash flow remains relatively robust and stable, Saga's share
price is approaching a ten-year low, and a meaningful share repurchase funded
by the sale of these non-productive TV assets would be very accretive on a per
share basis without creating additional financial leverage. Using sale
proceeds equal only to the book value of our television stations alone would
fund a Dutch auction share repurchase at an average of $10 per share (a 12.5%
premium to today's $8.89 closing price), while reducing total shares
outstanding by more than 15%. The result would be a more clearly focused
enterprise with far higher returns on capital and a correspondingly higher
share price.
The arithmetic of a share repurchase is extremely compelling. All Saga
shareholders who elect to remain would see their interest in Saga rise in
disproportion to the size of the repurchase. Under a 15% repurchase scenario,
for example, remaining shareholders experience a nearly 18% increase in their
percentage interest in the business. You would be the single largest
beneficiary.
While Saga has a repurchase plan in place already, the argument for a bolder
share repurchase could not be clearer. Under its existing repurchase plan,
Saga has bought stock as high as $23 per share, including 80,000 shares
purchased directly from you at $19 per share in 2003 when Saga's cash flow was
only modestly higher than in 2005. Given Saga's continuing strong cash flow,
the board of directors must give serious consideration to an aggressive share
repurchase program at 52% of the price paid for your shares. Why we would
purchase stock at $19 or $23 years ago while none was purchased for roughly
half the price in the fourth quarter of 2005 is a puzzling question.
Further strengthening the call to act is Saga's own acquisition history. In
early 2005, we paid more than $20 million and 13 times broadcast cash flow for
the Charlottesville properties. The pro forma statements in the 10k indicate
that Saga's 2005 acquisitions, in the aggregate, were dilutive. We now have
the opportunity to acquire our own stock at less than 5 times broadcast cash
flow per share which would be immediately and highly accretive. From a capital
allocation perspective, this is a ?no-brainer? and would have a very favorable
impact on intrinsic value per share. If we liked Charlottesville at 13 times
one year ago, we should relish the chance to buy the business we know best at 5
times today.
In the past year, you have described Saga as ?underleveraged.? Saga can
comfortably supplement the sales proceeds from the TV business with borrowings
to further advance the share repurchase program.
If you and the board are unwilling to engage in a sensible capital allocation
strategy that includes a significantly enhanced share repurchase, you should
explore the sale of the entire company. There is an active market for radio
properties with recent transactions exceeding 13 times BCF. Saga is small and
lacks scale, meaning that $8.1 million in corporate expenses (including perks
such as private jet usage) would disappear if Saga were acquired, making the
business more attractive to a larger owner than it is to your existing
shareholders ? yourself included.
Saga's Form 8-k dated March 20th disclosing your 2005 bonus of $400 thousand
indicated a discretionary component of $175 thousand reflecting, in part,
?market conditions and a subjective evaluation? of your performance. While the
sum is small in the context of the business it reveals a tone-deafness toward
your shareholders who have seen the value of their investment shrink by 9% in
2004, 35% in 2005, and a further 18% in the first ten weeks of 2006. We
presume the Compensation Committee was referring to the difficult conditions
extant in the terrestrial radio business but their approach seems backwards.
As chairman, president and CEO, you should take the lead on this issue.
Highly compensated executives should receive their reward after the owners
receive theirs. We suspect the lack of significant ownership by the committee
and most board members (yourself excluded) contributes toward this managers-
first mentality.
We are long-term, patient investors who have a constructive view of terrestrial
radio's future while also recognizing the new challenges it faces. Our
investment in Saga started in 2003 and to date reflects our desire to be
passive owners and part of the permanent capital base of our investees. It is
also consistent with our strategy of investing in good businesses run by good
managers at attractive valuations. Supervoting shares permit you to handpick
the board of directors, but control does not release them or you from their
fiduciary obligations to Saga's public stockholders. To the extent they are
overlooked, we will firmly remind them of their responsibilities. The world
has changed and directors rightly face far more scrutiny and accountability
from regulators and Wall Street than ever before.
We respectfully request that you promptly take advantage of the opportunities
discussed in this letter to enhance the long-term, intrinsic, per share value
of Saga Communications.
Very truly yours,
Peter C. Keefe
President
Cc: The Presiding Director, for distribution to all board members