Lee Enterprises wins court ruling in bid to thwart hedge fund takeover
Omaha, Neb. — Lee Enterprises' effort to repel a hostile takeover got a boost this week when a judge ruled the newspaper publisher could ignore two board nominations from the hedge fund Alden Global Capital.
But Alden said it will press the fight by urging shareholders to vote against Lee Chairman Mary Junck and one other longstanding board member at the company's March 10 annual meeting.
Lee Enterprises, based in Davenport, Iowa, said Tuesday that a Delaware judge supported its decision to reject Alden's nominees because the hedge fund didn't meet Lee's technical requirements to nominate board members. Late last year, Lee rejected Alden's $141 million offer, saying that it “grossly undervalues” the publisher of the St. Louis Post-Dispatch, Tulsa World, Richmond Times-Dispatch and dozens of other newspapers.
Lee urged shareholders to dismiss Alden's arguments that Junck and board member Herbert Moloney are putting their own interests ahead of what's best for shareholders.
“Now that the Delaware Court of Chancery has confirmed what we knew all along — that the Lee Board made a proper decision in rejecting Alden’s attempted nominations — Alden has invented entirely new, hollow governance complaints in its continuing and transparent attempt to destabilize the board and the company’s leadership," a Lee spokesman said.
Alden's critics have also raised concerns about the likelihood that the New York hedge fund would impose extreme cost cuts and extensive layoffs at Lee's newspapers if it were able to buy the company. That is the model Alden has used to boost profits at the more than 200 newspapers it has already acquired, including the Boston Herald, Chicago Tribune, Orange County Register and Denver Post.
But Alden, which owns 6.3% of Lee's stock, said it is looking out for other shareholders because it believes Lee has underperformed since it bought all of Berkshire Hathaway's newspapers in 2020 and has been struggling with the transition to publishing news online.
“We remain steadfast in our commitment to provide Lee with competent leadership that will improve returns for shareholders and the quality of journalism for readers,” Alden said in a statement.
Alden said it questions why Lee has made payments over the last two decades to companies associated with Moloney and why the company has done business with the personal law firm owned by its corporate secretary. Lee has defended its corporate practices and said it is making solid progress in growing digital subscriptions and online ad revenue.
Alden became one of the nation’s largest newspaper owners in recent years by buying up all of Tribune’s and MediaNews Group’s publications, the latter of which include The Detroit News.
Two other hedge funds that hold significant stakes in Lee have said they believe the company is worth much more than Alden offered.
Since November when Alden announced its bid, Lee's stock jumped as high as $44.43 before falling back to its current levels in the mid $30s. The stock was trading up 3% around midday Tuesday at $36.59.