December 15, 2021

Unsurprisingly, hedge fund Alden Global Capital has turned to the courts to try to gain leverage in its hostile takeover bid for Lee Enterprises.

In a suit filed Wednesday, an Alden affiliate argues that Lee was protecting the jobs of entrenched managers in rejecting three Alden nominees for its board of directors.

The action also says that Lee was improperly abrupt in rejecting Alden’s Nov. 22 bid of $24 a share, while quickly adopting a “poison pill” defense aimed at preventing Alden affiliates from building their share of stock beyond 10% over the next year.

That section of the suit has a noteworthy aside. “While Alden’s proposal represented a significant (30%) premium for stockholders,” the suit says,”it was designed to be a preliminary proposal, with the goal of opening a dialogue to engage constructively with the Company.”

In effect, Alden is conceding that the opening bid was a lowball offer. As I reported Tuesday, Lee’s shares have soared over the last month, trading as high as $40 this week. A $24-a-share offer no longer makes any sense unless the gains are reversed.

Alden’s suit, filed in Delaware chancery court, asks that its slate of three candidates for the eight-member Lee board be reinstated.

Alden’s strategy seems to have shifted back to gaining influence and seats on the board to make a case against Lee management. It pursued that gradual approach in pushing cost-cutting moves at Tribune Publishing over a period of two years before prevailing in a contested effort to buy the company this summer.

Lee, one of just four remaining publicly traded newspaper companies, has 77 dailies, mostly in the midwest, mid-south and mountain states. It has made the case that it should stay independent because digital transition plans are making strong progress and affiliated businesses are flourishing.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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